Expense Limit Proration: How Does it Work?

Modified on Mon, 3 Nov at 9:13 AM

Overview:

This article aims to explain the Expense Limit Proration logic in Omni and how it works.

It is expected that you have already gone through the Adding Expense Categories & Policies article which teaches you how to set up the Expense limit proration. This article is an add on to focus more on the logic and calculations behind the proration.

TABLE OF CONTENTS

Proration Definitions
Monthly Proration Rules
Daily Proration Rules

Proration Definitions

Proration in the first period determines whether the entitled expense limit is granted fully or partially in the first period when the policy is first assigned to a user.
Proration in the last period determines whether the entitled expense limit is granted fully or partially in the last period when the policy is removed from a user.

Monthly Proration Rules

Monthly prorated in the first period means the employee earns expense limit starting from the first full month worked.
Monthly prorated in the last period means the employee only earns expense limit if he works for the full month.
No expense limit is earned for partial month

Example 1:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Monthly Prorated; Last Period Proration = Monthly Prorated

Situation:

If a new hire joins on 15 October 2025, the first full month that the employee is entitled begins from; 1 November 2025.

To calculate the total allocated expense limit in 2025:

Number of months in period = Months between 01/11/2025-31/12/2024 = 2
Number of months in policy period = Months between 01/01/2025-31/12/2025 = 12
Yearly Expense limit granted = 2/12 x USD6,000 = USD1,000
Monthly Expense limit granted = USD500

Example 2:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Monthly Prorated; Last Period Proration = Monthly Prorated

Situation:

If an employee's last working day is 27th October 2025, the month that the expense limit will calculate from will be the nearest last day of the previous month; 30th September 2025. Since the employee did not work a full month in October, the expense limit will only take into account completed months of service.

To calculate the allocated expense limit in 2025:

Number of months in period = Months between 01/01/2025-30/09/2025 = 9
Number of months in policy period = Months between 01/01/2025-31/12/2025 = 12
Yearly Expense limit granted = 9/12 x USD6,000 = USD4,500
Monthly Expense limit granted = up to USD500 (subject to the remaining yearly expense limit of that employee)

Example 3:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Monthly Prorated; Last Period Proration = Monthly Prorated

Situation:

An employee started in 15th Aug 2025 but leaves on 15th November 2025, the proration will apply to both periods. The period month begins from the first day of full completed month; 1 September 2025 and the last day of the full month the employee had completed; 31 Oct 2025

To calculate the allocated expense limit:

Number of months in period = Months between 01/09/2025-31/10/2025 = 2
Number of months in policy period = Months between 01/01/2025-31/12/2025 = 12
Total Expense limit granted in 2025 = 2/12 x USD6,000 = USD1,000
Expense limit granted in final month = up to USD500 (subject to the remaining expense limit of that employee)

Daily Proration Rules

Daily prorated in the first or last period means the user earns expense limit based on the number of days he works. It will be calculated based on calendar days

Example 1:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Daily Prorated; Last Period Proration = Daily Prorated

Situation:

If a new hire joins on 15 October 2025. The expense limit is based on number of days they will work in the calendar year.

To calculate the total allocated expense limit in 2025:

Number of days in period = Days between 15/10/2025-31/12/2025 = 78
Number of days in policy period = Days between 01/01/2025-31/12/2025 = 365
Yearly Expense limit granted = 78/365 x USD6,000 = USD1,282.19
Number of days in first month period = Days between 15/10/2025-31/10/2025 = 17
Number of days in first month in policy period = Days between 1/10/2025-31/10/2025 = 31
Expense limit granted in first month = 17/31 x USD500 = USD274.19
Monthly Expense limit granted after first month = USD500

Example 2:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Daily Prorated; Last Period Proration = Daily Prorated

Situation:

An employee had resigned and their last working day is 27th October 2025. The expense limit will be calculated up to the last day of the employee working day.

To calculate the allocated expense limit:

Number of days in period = Days between 01/01/2025-27/10/2025 = 300
Number of days in policy period = Days between 01/01/2025-31/12/2025 = 365
Yearly Expense limit granted = 300/365 x USD6,000 = USD4,932.51
Number of days in last month period = Days between 01/10/2025-27/10/2025 = 27
Number of days in final month of employee for policy period = Days between 01/10/2025-31/10/2025 = 31
Expense limit granted in final month = 27/31 x USD500 = USD435.48

Example 3:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Daily Prorated; Last Period Proration = Daily Prorated

Situation:

An employee started in 15th August 2025 but leaves on 15th November 2025, the proration will apply to both periods.

To calculate the allocated expense limit:

Number of days in period = Days between 15/08/2025-15/11/2025 = 93
Number of days in policy period = Days between 01/01/2025-31/12/2025 = 365
Total Expense limit granted in 2025 = 93/365 x USD6,000 = USD1,528.77
Number of days in last month period = Days between 01/11/2025-15/11/2025 = 15
Number of days in final month of employee for policy period = Days between 01/11/2025-30/11/2025 = 30
Expense limit granted in final month = 15/30 x USD500 = USD250

Example 4:

Policy:

1. Yearly Expense Limit is USD6,000 and Monthly Expense Limit is USD500

2. Policy Effect Date 1 January

3. First Period Proration = Monthly Prorated; Last Period Proration = Daily Prorated

Situation:

An employee started on 15th August 2025 but leaves on 15th November 2025. If first and last period falls within the same limit period, settings in last period takes precedence. Therefore, the calculation will comply with the daily proration for full period.

To calculate the allocated expense limit:

Number of days in period = Days between 15/08/2025-15/11/2025 = 93
Number of days in policy period = Days between 01/01/2025 - 31/12/2025 = 365
Total expense limit granted in 2025 = 93/365 x USD6,000 = USD1,528.77
Number of days in last month period = Days between 01/11/2025-15/11/2025 = 15
Number of days in final month of employee policy period = Days between 01/11/2025-30/11/2025 = 30
Expense limit granted in final month = 15/30 x USD500 = USD250

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