Pro rata

Pro ratais an adverb or adjective meaning in equal portions or in proportion.The term is used in many legal and economic contexts. The hyphenated spellingpro-ratafor the adjective form is common, asrecommended for adjectivesby some English-language style guides. InAmerican English,this term has beenvernacularizedtoproratedorpro-rated.

Meanings

More specifically,pro ratameans:

• Inproportionalityto some factor that can be exactlycalculated
• To count based on an amount oftimethat has passed out of the total time
• Proportionalratio

Pro rata has aLatinetymology,frompro,according to, for, or by, andrata,feminineablativeof calculated (rate or change).

Examples

When liability for atoxic tortor adefective productconcerns many manufacturers, theliabilityundertort lawis allocated pro rata.Examples inlawandeconomicsinclude the following, noted below:

Partnership liability

Each of severalpartners"is liable for [her or his] own share or proportion only, they are said to be boundpro rata.An example... may be found in the liability of partners; each is liable... onlypro ratain relation to between themselves. "

Bankruptcy law

When adebtorfiles forbankruptcy,and "the debtor is insolvent,creditorsgenerally agree to accept a pro rata share of what is owed to them. If the debtor has any remaining funds, the money is divided proportionately among the creditors, according to the amount of the individual debts. ""A creditor of an insolvent estate is to be paid pro rata with creditors of the same class."

Worker's pay and benefits

A worker's part-time work,overtimepay, andvacationtime are typically calculated on a pro rata basis.

UnderUS Federalregulations,agovernmentworker has the right such that: "When an employee's service is interrupted by a non-leave earning period, leave is earned on a pro rata basis for each fractional pay period that occurs within the continuity of employment."

TheAmerican Federation of Teachers(AFT), aUSlabor union,argues thatallpart-time oradjunctinstructors should get pro-rata pay for teachingcollegecourses.This is an important issue, as of 2010, for part-timefaculty.

Irishsecondary schoolteachers are entitled to pro rata pay for part-time work.

UnderBritishemployment law,"Regulations state that, where appropriate, the pro rata principle should be applied to any comparison... to be given... holiday."

Likewise, inTasmania,Australia,the law clearly grants workers the privilege of part-time benefits forleave of absence.This is granted under theLong Service Leave Act 1976.

Investment laws

Incorporatepractice, "a pro-rata dividend means that every shareholder gets an equal proportion for each share he or she owns."

Inbanking,"Pro-rating also refers to the practice of applying interest rates to different time frames. If the interest rate was 12% per annum, you could pro-rate this number to be 1% a month (12%/12 months)."

Venture capital

Inventure capital,it can refer to the Pro-Rata Participation right and mean "the right to continue to participate in future rounds so that you can maintain your ownership."

Insurance

Ininsurance,pro ratais used to determineriskbased on the time theinsurance policyis in effect.It may also be used to describeproportional liabilitywhen more than one person is responsible for alossoraccident.

Insurance cancellation method

Calculation ofreturn premiumof a cancelledinsurance policyis often done using acancellation methodcalledpro rata.First, areturn premiumfactor is calculated by taking the number of days remaining in the policy period divided by the number of total days of the policy. This factor is then multiplied by the policy premium to arrive at thereturn premium.Traditionally, this has been done manually using apaper wheel calculator.Today, it is normally done using anonline wheel calculator.

College tuition

When acollegestudentwithdraws, colleges may refund tuition payments on a pro rata basis.

Aviation

In theUnited States,a private pilot may pay no less than the pro rata share of the total price of the flight when carrying passengers.

Automobile

Pro-Ration (pro rata) means if the battery fails anytime within the first two years of service, it is replaced for free. After those first two years, a pro-rated fee is assessed for the replacement. However, the pro-ration (pro rata) is typically calculated from the date the battery was sold.

See also

• Employee Retirement Income Security Act
• Legal liability
• Pro rata cancellation
• Pro rata condition of averages
• Vesting