Pro Rata Calculator
What Does "Calculated Pro Rata" Mean?
The term pro rata is a Latin phrase meaning "in proportion." When something is calculated pro rata, it means assigning an amount to a fraction of a whole based on its share of the total. In simple terms, it ensures that you only pay for what you use or receive payment for what you have provided.
This method is widely used in business, finance, and employment law to ensure fairness when a full billing cycle or contract period isn't completed.
Common Pro Rata Scenarios
- Rental Agreements: If you move into an apartment on the 15th of a 30-day month, you pay a pro-rated rent for the remaining 15 days rather than the full month.
- Employment Salary: If an employee starts a job mid-month, their first paycheck is calculated pro rata based on the number of days worked versus the total working days in that month.
- Service Subscriptions: If you cancel a software subscription halfway through a billing cycle, a pro rata refund might be issued for the unused portion.
- Dividend Payments: Shareholders receive dividends pro rata based on the number of shares they own relative to the total outstanding shares.
Imagine a monthly rent of 1,500. There are 31 days in July. You move in on July 20th, meaning you will live there for 12 days.
1. Daily Rate: 1,500 ÷ 31 = 48.387 per day.
2. Pro Rata Amount: 48.387 × 12 days = 580.64.
The Pro Rata Formula
The mathematical logic behind a pro rata calculation is straightforward:
(Total Amount / Total Units in Period) × Units Actually Used = Pro Rata Amount
How to Use This Calculator
To get an accurate result, ensure your units are consistent. For example, if you are calculating a partial month's rent, use "Days" for both the total period and the used portion. If you are calculating a part-time salary based on hours, use "Hours" for both fields.