Pro rata

Pro rata is an adverb or adjective, meaning in propor-tion.[1] The term is used in many legal and economic con-texts. It is sometimes spelled pro-rata, but this is techni-cally a misspelling of the Latin phrase. In North Ameri-can English this term has been vernacularized to prorated.

1 MeaningsMore specically, pro rata means:

1. In proportionality to some factor that can be exactlycalculated.[2][3]

2. To count based on amount of time that has passedout of the total time.

3. Proportional Ratio[4]

Pro rata has a Latin etymology, from pro, according to,for, or by, and rata, feminine ablative of calculated (rateor change).[5]

2 ExamplesExamples in law and economics include the followingnoted below.

2.1 TortsWhen liability for a toxic tort or a defective product con-cerns many manufacturers, the liability under tort law isallocated pro rata.[6]

2.2 Partnership liabilityEach of several partners is liable for his own share orproportion only, they are said to be bound pro rata. Anexample ... may be found in the liability of partners;each is liable ... only pro rata in relation to betweenthemselves.[7]

2.3 Bankruptcy lawWhen a debtor les for bankruptcy, and the debtor isinsolvent, creditors generally agree to accept a pro rata

share of what is owed to them. If the debtor has anyremaining funds, the money is divided proportionatelyamong the creditors, according to the amount of the in-dividual debts. [8] A creditor of an insolvent estate is tobe paid pro rata with creditors of the same class.[9]

2.4 Workers pay and benets

A workers part-time work, overtime pay, and vacationtime are typically calculated on pro rata basis.[10][11]

Under US Federal regulations, a government worker hasthe right such that: When an employees service is inter-rupted by a non-leave earning period, leave is earned ona pro rata basis for each fractional pay period that occurswithin the continuity of employment.[12]

The American Federation of Teachers (AFT), a US laborunion, argues that all part-time or adjunct instructorsshould get pro-rata pay for teaching college courses.[13]This is an important issue, as of 2010, for part-timefaculty.[14]

Irish secondary school teachers are entitled to pro rata payfor part-time work.[15]

Under British employment law, Regulations state that,where appropriate, the pro rata principle should be ap-plied to any comparison ... to be given ... holiday.[16]

Likewise, in Tasmania, Australia, the law clearly grantsworkers the privilege of part-time benets for leave of ab-sence.[17][18] This is granted under the Long Service LeaveAct 1976.[19]

2.5 Investment laws

In corporate practice, a pro-rata dividend means that ev-ery shareholder gets an equal proportion for each share heor she owns. [4]

In banking, Pro-rating also refers to the practice of ap-plying interest rates to dierent time frames. If the in-terest rate was 12% per annum, you could pro-rate thisnumber to be 1% a month (12%/12 months). [4]

2.6 Insurance

In insurance, pro rata is used to determine risk based onthe time the insurance policy is in eect.[20] It may alsobe used to describe proportional liability when more than

1

2 4 REFERENCES

one person is responsible for a loss or accident.[8]

2.7 Insurance cancellation method

Calculation of return premium of a cancelled insurancepolicy is often done using a cancellation method calledpro rata. First a return premium factor is calculated bytaking the number of days remaining in the policy perioddivided by the number of total days of the policy. Thisfactor is then multiplied by the policy premium to arriveat the return premium. Traditionally this has been donemanually using a paper wheel calculator. Today it is nor-mally done using an online wheel calculator.[21]

2.8 College tuition

When a college student withdraws, colleges may refundtuition payments on a pro rata basis.

2.9 Billing

Reading a monthly bill for service that would be prorated.Determine the daily amount of a monthly charge beingprorated by dividing it by the number of days in the cycle(30 is normally used by most systems by default). The re-sulting number is the daily amount. Example: Based on a30 day bill cycle and a monthly recurring charge of $30,the daily amount is $1.00 ($30/30 days = $1.00). Deter-mine the number of prorated days. The monthly servicecharges begin the day service is activated. Example: Ser-vice starting on the 20th day of a cycle means there are 10prorated days. Multiply the daily amount by the numberof days being prorated. This gives you the total proratedamount. Example: $1.00 x 10 days = $10.

3 See also Employee Retirement Income Security Act

Legal liability

Pro rata cancellation

Pro rata condition of averages

Vesting

4 References[1] Farlexs The Free Dictionary Article is available to sub-

scribers only.

[2] Investor Words web site

[3] Ehrlich, Eugene (1987) [1985]. Amo, Amas, Amat andMore. New York: Harper Row. p. 233. ISBN 0-06-272017-1.

[4] Investopedia web site. Accessed May 29, 2008.

[5] The Free Dictionary. Accessed May 29, 2008.

[6] State of Maine government web site pdf le listing of ProRata Share Responsibility.

[7] ClickDocs UK Legal web site (quote marks changed toitalics for clarity).

[8] Jrank.org legal web site

[9] WWLIA legal web site

[10] John Steven Niznik, Pro Rata, at Job Search Tech website.

[11] TheSite.org web page about pro-rata payment for part-time work

[12] US Department of Commerce Oce of Human Re-sources Management ocial web site, citing 5 CFR630.204.

[13] AFT web site

[14] California Part-time Faculty Association ocial web sitepage regarding pro-rata pay

[15] Association of Secondary Teachers Ireland ocial website page regarding pro-rata pay

[16] NASUWT web site Holiday is used here in the Britishsense of the American vacation.

[17] Tasmanian Government ocial web site

[18] Tasmanian Government ocial web site pdf le.

[19] Tasmanian Legislation online ocial web site

[20] InsuranceZA web site

[21] Online Wheel Calculator

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MeaningsExamplesTortsPartnership liabilityBankruptcy lawWorkers pay and benefitsInvestment lawsInsuranceInsurance cancellation methodCollege tuitionBilling

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