pro rata assignment

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This brochure provides an in-depth description of the exercise and assignment process for options on futures that trade on CME Group-designated contract markets:

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Contents include:

• Preliminaries
• Random Assignment
• Pro Rata Assignment
• The Role of the Clearing Member Firm
• Timetables for Option Exercise and Assignment
• Overview of contrary options exercise

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Information about the exercise and assignment process for options on futures on CME Group designated contract markets.

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What Is Pro Rata?

Understanding pro rata.

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Why Pro Rata Works

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Pro Rata: What It Means and the Formula To Calculate It

Pro rata is a Latin term used to describe a proportionate allocation. It essentially translates to "in proportion," which means a process where whatever is being allocated will be distributed in equal portions.

If something is given out to people on a pro rata basis, it means assigning an amount to one person according to their share of the whole. While a pro rata calculation can be used to determine the appropriate portions of any given whole, it is often used in business finance.

Key Takeaways

• If something is given out pro rata, it typically means everyone gets their fair share.
• Pro rata means proportionally, such as dividends awarded to investors based on their proportion of investment.
• The concept of pro rata is rooted in fractions, as proration attempts to make two fractions equal to each other but with different denominators.
• The practice of prorating can apply in many areas, from billing for services to paying out dividends or allocating business partnership income.
• Pro rata is calculated by dividing the instance of an item by the maximum quantity of that item. This ratio can then be applied to any related item to find the same proportion.

Investopedia / Matthew Collins

Pro rata typically means that each party or person receives their fair share in proportion to the whole. Pro rata calculations can be used in many areas, including determining dividend payments, which are cash payments by corporations paid to shareholders.

In insurance, pro rata is used to determine the amount of premium due for a policy that only covers a partial term. Allocating the appropriate portion of an annual interest rate to a shorter time frame can also be done via pro rata.

Pro rata is also used to determine how much of a distribution from a qualified retirement account—such as an IRA, SEP, or 401(k)—is taxable when the account contains before and after-tax dollars. For example, an account holder has a 401(k) funded with 20% pre-tax dollars and 80% post-tax dollars. As a result, withdrawals will consist of 20% taxable and 80% non-taxable money.

How To Calculate Pro Rata

Pro rata is calculated based on three items:

• The number of items true, owned, or having been incurred.
• The total quantity of that item (i.e. maximum quantity possible).
• The quantity of a related item that will be assigned in the second bullet above.

Pro Rata Share = (Number of "True" Items / Maximum Quantity Possible)

Pro Rata Distribution = Pro Rata Share * Quantity of Related Item

For example, imagine an employee set to receive a $10,000 bonus this year. If the employee leaves at any point, they will receive a pro rata share of the bonus. The employee leaves on March 20th. The agreement awards the bonus based on the number of days worked (inclusive of the last day).

To calculate the pro rata share, divide the number of true items by the maximum quantity possible. In this example, the number of true items is the number of days worked. Assuming a non-leap year, there are 79 days (inclusive) between January 1 and March 20. In addition, the maximum number of days possible is 365.

Pro rata share = 79 / 365 = 21.64%

To calculate the pro rata distribution, multiply the pro rata share by the related item. In this example, the item we want to pro rate is the annual bonus.

Pro rata distribution = 21.64% * $10,000 = $2,164

Therefore, in this example, by leaving on March 20, the employee will receive a pro rata distribution of $2,164 based on the prorated number of days worked of the year.

Pro rata can be communicated as a percent (i.e. the shareholder owns 10% of the company's stock) or as a quantity (i.e. the shareholder owns 100,000 of the company's 1 million shares of stock.

The mathematical concept of pro rata works because the proportion of one good is imposed on another. Pro rata entails taking a fraction of one item and conveying the same fraction on another base.

The root of pro rata is grounded in proportionally equal fractions with different denominators. In the example above, the fraction 79/365 is equal to the fraction 2,164/10,000 (ignoring rounding variances). Therefore, pro rata is simply taking one fraction and finding its equal given a specific denominator. Stated another way, pro rata attempts to solve for the numerator to make two fractions equal given specific criteria.

Consider another example where you and a friend want to proportionally share four pieces of pizza. If the slices are shared equally, each of you would receive 50% of the pizza. Therefore, this pro rata example is trying to determine which fraction with a denominator of 4 is equal to 1/2. Since 2/4 = 1/2, each of you gets two slices.

Examples of Pro Rata

Pro rata and dividends per shareholder.

When a company pays dividends to its shareholders, each investor is paid according to its holdings. If a company has 100 shares outstanding , for example, and issues a dividend of $2 per share, the total amount of dividends paid will be $200. No matter how many shareholders there are, the total dividend payments cannot exceed this limit. In this case, $200 is the whole, and the pro rata calculation must be used to determine the appropriate portion of that whole due to each shareholder.

Assume there are only four shareholders who hold 50, 25, 15, and 10 shares, respectively. The amount due to each shareholder is their pro rata share. This is calculated by dividing the ownership of each person by the total number of shares and then multiplying the resulting fraction by the total amount of the dividend payment.

The majority shareholder's portion, therefore, is (50 / 100) x $200 = $100. This makes sense because the shareholder owns half of the shares and receives half of the total dividends. The remaining shareholders get $50, $30, and $20, respectively.

Be mindful of situations where weight is not given to different individuals. For example, regardless of age, income, or any other factor, every American citizen eligible to vote can cast a tally equal to every other citizen. In this example, the pro rata value of the vote is equal to 1 divided by the total population that votes.

Pro Rata for Insurance Premiums

Another common use is to determine the amount due for a partial insurance policy term. Most insurance policies are based on a 12-month period, so if a policy is needed for a shorter term, the insurance company must prorate the annual premium to determine what is owed. To do this, divide the total premium by the number of days in a standard term, and multiply by the number of days covered by the truncated policy.

For example, assume an auto policy that typically covers a full year carries a premium of $1,000. If the insured only requires the policy for 270 days, then the company must reduce the premium accordingly. The pro rata premium due for this period is ($1,000 / 365) x 270 = $739.73.

Pro Rata for Interest Rates

Pro rata calculations are also used to determine the amount of interest that will be earned on an investment. If an investment earns an annual interest rate, then the pro rata amount earned for a shorter period is calculated by dividing the total amount of interest by the number of months in a year and multiplying by the number of months in the truncated period. The amount of interest earned in two months on an investment that yields 10% interest each year is (10% / 12) x 2 = 1.67%.

When it comes to bonds, payment on accrued interest is calculated on a pro rata basis. Accrued interest is the total interest that has accumulated on a bond since its last coupon payment. When the bondholder sells the bond before the next coupon date, they're still entitled to the interest that accrues up until the time the bond is sold. The bond buyer, not the issuer, is responsible for paying the bond seller the accrued interest, which is added to the market price.

The formula for accrued interest is as follows:

AI = Face Value of Bond × Coupon Rate × Time Factor where: AI = Accrued Interest Coupon Rate = Annual Coupon Rate Number of Periods Per Year Time Factor = Days Lapsed Since Last Payment Days in Payment Period \begin{aligned} &\text{AI} = \text{Face Value of Bond} \times \text{Coupon Rate} \times \text{Time Factor} \\ &\textbf{where:} \\ &\text{AI} = \text{Accrued Interest} \\ &\text{Coupon Rate} = \frac{ \text{Annual Coupon Rate} }{ \text{Number of Periods Per Year} } \\ &\text{Time Factor} = \frac{ \text{Days Lapsed Since Last Payment} }{ \text{Days in Payment Period} } \\ \end{aligned} ​ AI = Face Value of Bond × Coupon Rate × Time Factor where: AI = Accrued Interest Coupon Rate = Number of Periods Per Year Annual Coupon Rate ​ Time Factor = Days in Payment Period Days Lapsed Since Last Payment ​ ​

The factor is calculated by dividing the length of time the bond was held after the last coupon payment by the time from one coupon payment to the next.

For example, consider a bondholder who sells their corporate bond on June 30. The bond has a face value of $1,000 and a 5% coupon rate, which pays semiannually on March 1 and Sept. 1. The buyer of the bond will pay the seller:

$ 1 , 000 × 5 % 2 × 122 184 = $ 16.58 \begin{aligned}&\$1,000 \times \frac { 5\% } { 2 } \times \frac { 122 }{ 184 } = \$16.58 \\\end{aligned} ​ $1 , 000 × 2 5% ​ × 184 122 ​ = $16.58 ​

What Does Pro Rata Mean?

Pro rata is a defined portion in relation to the entirety of an item. Instead of getting all of the items, someone can get a pro rata share , a proportional offering based on how much they are entitled to. For example, if I own 10% of a building, I may expect a pro rata share of 10% of the building's rental income.

What Is the Difference Between Prorated and Pro Rata?

Pro rata and prorated are used interchangeably to define the same thing. Both signify that of any given whole unit, a specific section of it has a defined allocation for an underlying reason.

How Do I Calculate Pro Rata?

Naturally, calculating the pro rata of different items varies since it calculates a proportion of a given whole. To calculate the prorated interest rate over six months, for instance, consider a company that charges 20% interest per year. Here, the prorated interest rate would be calculated as (20% / 12) x 6 = 10%. 

How Does Pro Rata Apply to Dividends Per Share?

When a company distributes dividends, typically it is executed on a pro rata basis. For example, consider a majority shareholder, such as a founder or key executive, who owns 50% of a company's total 1,000 shares and the company is issuing a $1 dividend. Of the $1,000 in dividends, the majority shareholder would receive $500 in value. The formula would be as follows: (50 / 100) x $1,000 = $500. 

What Is a Pro Rata Discount?

A pro rata discount is a type of discount a merchant offers a customer. Companies offer customers discounts for a variety of reasons. They may offer a discount as an incentive to a new customer to try a product or service. They may offer a discount if the customer makes a purchase during a specific time period or as a bonus to a returning customer.

The pro rata part of the discount varies depending on how the merchant has structured their offer. For example, a merchant may offer a new customer $20 off their first purchase of products if they spend $100 or more. If the customer buys four products, each item would receive a $5 discount.

A pro rata discount could also apply if a customer joins a monthly subscription service on any day other than the first of the month. Rather than charging the customer the full subscription price for the month, the merchant would apply a pro rata discount and only charge the customer for the number of days in the month they actually had the service.

Internal Revenue Service. " Rollovers of After-Tax Contributions in Retirement Plans ."

Compass Insurance Agency. “ Prorated Insurance Rates Explained .”

FasterCapital. “ How Accrued Interest Is Calculated in the Bond Market .”

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Pro rata definition

What is pro rata.

Pro rata refers to a proportional allocation . Under this approach, amounts are assigned based on each participant’s proportional share of the whole. The intent is to create an assignment based on each party’s fair share of the whole.

Examples of Pro Rata

In accounting, this means revenues ,  expenses ,  assets ,  liabilities , or other items are proportionally allocated among participants. A participant may be an individual or an entity. The pro rata term can be applied to a number of scenarios.  For example:

Pro Rata Billings

As an example of a pro rata billing, a customer prepays for services not yet provided in the amount of $1,000, and then cancels service 10 days into the 30-day service period. The seller calculates the amount it has earned as 10 service days divided by the 30-day service period, or $300, and returns the remaining $700 to the customer. This is a pro rata distribution based on the passage of time.

Pro Rata Distribution

As an example of a pro rata distribution, a business is sold, and the proceeds are distributed to the common shareholders based on the number of shares held by each one. This is a pro rata distribution based on share holdings.

Pro Rata Variance Allocation

As an example of a pro rata variance allocation, a company uses a standard costing system to account for its inventory , and has an unfavorable variance of $100,000 that it must allocate between the cost of goods sold and ending inventory . There is $200,000 of ending inventory, and there were $800,000 of cost of goods sold during the period. Accordingly, the company allocates $20,000 of the unfavorable variance to ending inventory (calculated as $200,000 ending inventory ÷ $1,000,000 allocation base , multiplied by the $100,000 variance) and $80,000 to the cost of goods sold (calculated as $800,000 cost of goods sold ÷ $1,000,000 allocation base, multiplied by the $100,000 variance). This is a pro rata distribution based on recorded cost.

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Pro Rata Expense Allocation

As an example of a pro rata expense allocation, a company incurred $1,200 of interest expense over an entire year, and wants to allocate it to individual months. One method of doing so is to evenly allocate it by month, so that each month is charged $100. This is a pro rata distribution based on the number of months.

Pro Rata Partnership Liability

As an example of a pro rata partnership liability, a partnership agreement states that each partner is liable to pay for any claims against the partnership, up to his or her partnership share. There is a legal settlement for $1,000,000. Partner Smith has a 20% interest in the partnership, and so is liable for $200,000 of the legal settlement. This is a pro rata payment based on ownership interest.

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Proportional assignment: Pro Rata: Optimal Resource Sharing

1. introduction, 2. understanding proportional assignment, 3. what is pro rata, 4. the importance of optimal resource sharing, 5. benefits of proportional assignment, 6. challenges of proportional assignment, 7. examples of proportional assignment in real life, 8. implementing proportional assignment in your organization, 9. conclusion and future implications.

When it comes to resource sharing, proportional assignment is an important concept that ensures that all parties involved receive a fair share of the resources. Pro Rata is a term used to describe the proportional allocation of resources, based on a specific formula or method. This concept is widely used in various fields, including finance, law, and economics, as well as in everyday life situations where resources are shared among multiple parties. Pro Rata helps to ensure that resources are distributed in an equitable and fair manner, which is essential for maintaining healthy relationships and promoting cooperation.

Here are some key insights about the concept of Pro Rata, from different points of view:

1. From a legal perspective, Pro Rata is used to allocate damages or losses among multiple parties. For example, if a group of people are involved in an accident, and a court decides that they are all liable for damages, Pro Rata can be used to determine each person's share of the total damages.

2. In finance, Pro Rata is used to determine the allocation of shares or dividends among shareholders. For example, if a company decides to issue new shares, Pro Rata will ensure that each shareholder receives a proportional allocation based on their existing shareholding.

3. In resource sharing, Pro Rata is used to allocate resources based on the relative needs or contributions of each party. For example, if a group of people are sharing a pizza, Pro Rata will ensure that each person receives a proportional share based on their appetite or contribution to the cost of the pizza.

Here are some key points to keep in mind when it comes to Pro Rata:

- Pro Rata is based on a specific formula or method, which ensures that resources are allocated in a fair and equitable manner.

- Pro Rata is widely used in various fields, including law, finance, and resource sharing, and is an essential concept for maintaining healthy relationships and promoting cooperation.

- Pro Rata can be used to allocate damages or losses, as well as shares or dividends, among multiple parties.

- Pro Rata can be applied in everyday life situations, such as sharing a pizza, to ensure that each person receives a fair share based on their needs or contributions.

In summary, Pro Rata is an important concept that ensures that resources are allocated in a fair and equitable manner. It is widely used in various fields, and is essential for maintaining healthy relationships and promoting cooperation. By understanding Pro rata , we can ensure that resources are distributed in a way that is fair and beneficial for all parties involved.

Introduction - Proportional assignment: Pro Rata: Optimal Resource Sharing

Proportional assignment is a crucial concept in resource sharing that ensures that each party involved receives its share of the resources. It is a fair and just way of allocating resources, and it works by assigning a proportional amount of resources to each party depending on their contribution to the project. The proportional assignment approach is essential in situations where resources need to be shared, such as in joint ventures, partnerships, and collaborations. It ensures that each party gets a fair share of the resources and that no one is left out or disadvantaged. In this section, we will explore the concept of proportional assignment in-depth and provide insights from different points of view.

1. Definition of Proportional Assignment: Proportional assignment, also known as pro-rata allocation, is a method of assigning resources based on the proportional contribution of each party to the project. It is a fair and just way of allocating resources in situations where multiple parties are involved.

2. The Importance of Proportional Assignment: Proportional assignment is essential in resource sharing as it ensures that each party involved is treated fairly and that no one is left out or disadvantaged. It is a fair approach that ensures that each party gets a proportional amount of the resources based on their contribution to the project.

3. Examples of Proportional Assignment: Let's say that two companies, A and B, decide to collaborate on a project. Company A invests $100,000, while Company B invests $50,000. The total investment in the project is $150,000. To ensure that each company gets a proportional share of the resources, Company A would receive 66.67% of the resources, while Company B would receive 33.33% of the resources.

4. Advantages of Proportional Assignment: Proportional assignment has several advantages, including fairness, transparency, and accountability. It ensures that each party involved is treated equally and that no one is left out or disadvantaged. It is a transparent approach that allows each party to see how the resources are allocated, and it promotes accountability.

5. Disadvantages of Proportional Assignment: One of the disadvantages of proportional assignment is that it can be complex to calculate the proportional allocation of resources, especially in situations where there are many parties involved. It can also be time-consuming and may require specialized expertise to ensure that the allocation is fair and just.

Proportional assignment is a fair and just way of allocating resources in situations where multiple parties are involved. It ensures that each party gets a proportional amount of the resources based on their contribution to the project. While it has its advantages and disadvantages, proportional assignment remains an essential concept in resource sharing that promotes fairness, transparency, and accountability.

Understanding Proportional Assignment - Proportional assignment: Pro Rata: Optimal Resource Sharing

Pro Rata is a term used to describe a proportional allocation of resources. It is a method used to divide resources among different parties based on their respective shares. In the context of resource sharing, Pro Rata refers to the allocation of resources based on the proportion of resources that each party is entitled to. This method is used when there are limited resources available, and they need to be shared among several parties. Pro Rata ensures that each party receives a fair share of the resources based on their contribution. Pro Rata is a commonly used method in different fields, such as finance, accounting, and law.

Here are some key insights to help you better understand Pro Rata:

1. Pro Rata is a Latin term that means "in proportion." It is used to describe a proportional allocation of resources based on the proportion of resources that each party is entitled to. For example, if there are 10 units of a resource to be shared among three parties, and party A is entitled to 4 units, party B is entitled to 3 units, and party C is entitled to 3 units, then the resource will be allocated to each party in proportion to their entitlement. Party A will receive 4 units, party B will receive 3 units, and party C will receive 3 units.

2. Pro Rata is commonly used in finance and accounting to calculate the proportional allocation of expenses or revenue among different parties. For example, if a company has two investors, and one investor has invested 60% of the total capital, while the other investor has invested 40%, then the expenses or revenue will be allocated to each investor in proportion to their investment.

3. Pro Rata is also used in law to describe the proportional allocation of damages or liability among different parties. For example, if two parties are found liable for an accident, and one party is found to be 60% liable, while the other party is found to be 40% liable, then the damages will be allocated to each party in proportion to their liability.

4. Pro Rata is a fair method of resource allocation because it ensures that each party receives a share of the resources based on their contribution. This method is commonly used when there are limited resources available, and they need to be shared among several parties.

5. Pro Rata can also be used to describe the proportional allocation of time, such as when an employee works part-time and is entitled to a pro-rata share of benefits or vacation time based on their hours worked.

Pro Rata is a proportional allocation method that ensures that each party receives a fair share of the resources based on their contribution. This method is commonly used in finance, accounting, law, and other fields to allocate resources, expenses, revenue, damages, or liability among different parties. Pro Rata is a fair and efficient method of resource allocation that helps to ensure that resources are shared equitably.

What is Pro Rata - Proportional assignment: Pro Rata: Optimal Resource Sharing

Optimal resource sharing is a crucial aspect of any business or organization. It is the process of allocating resources effectively and efficiently to achieve the best possible outcome, both for the organization and the individuals involved. As businesses and organizations continue to grow and expand, the need for optimal resource sharing becomes increasingly important. When resources are shared optimally, organizations can maximize their productivity, minimize waste, and ensure that everyone has access to the resources they need to succeed.

One of the most important aspects of optimal resource sharing is proportional assignment, also known as pro rata. This method of resource allocation ensures that each individual involved in a project or initiative receives a fair share of the available resources. Proportional assignment is particularly important when resources are limited, as it helps to prevent any one individual or group from monopolizing the resources and leaving others without the resources they need.

To better understand the importance of optimal resource sharing, here are some insights from different points of view:

1. From a business perspective, optimal resource sharing can help to reduce costs and increase productivity. When resources are shared effectively, businesses can avoid the unnecessary duplication of resources and ensure that everyone has access to the resources they need to complete their work. This can help to minimize waste and improve overall efficiency , allowing businesses to maximize their profits and achieve their goals.

2. From an individual perspective, optimal resource sharing can help to ensure that everyone has access to the resources they need to succeed. This can be particularly important in educational settings, where students may not have access to the same resources as their peers. By sharing resources optimally, educators can help to level the playing field and ensure that all students have the opportunity to learn and succeed.

3. From a societal perspective, optimal resource sharing can help to promote equity and fairness . When resources are allocated proportionally, everyone has access to the resources they need to achieve their goals, regardless of their background or circumstances. This can help to reduce inequality and promote social justice , creating a more equitable and inclusive society.

To sum up, optimal resource sharing, particularly through proportional assignment, is crucial for businesses, individuals, and society as a whole. It can help to reduce waste, increase productivity, promote fairness, and ensure that everyone has access to the resources they need to succeed. By sharing resources effectively, we can create a more sustainable, equitable, and prosperous future for all.

The Importance of Optimal Resource Sharing - Proportional assignment: Pro Rata: Optimal Resource Sharing

Proportional assignment is an effective way to ensure optimal resource sharing in different settings. One of the key benefits of using proportional assignment is that it ensures fairness and equity among the parties involved in the resource sharing. It is an efficient method that ensures that each party receives a proportional share of resources based on the agreed criteria, which could be time, space, or any other measurable factors.

Another benefit of proportional assignment is that it helps to reduce conflicts and misunderstandings that may arise from resource sharing. This is because the method is transparent and objective, leaving no room for bias or favoritism. Each party involved in the resource sharing knows exactly what to expect and what is expected of them, which can help to prevent conflicts and promote cooperation.

Here are some additional benefits of proportional assignment:

1. Flexibility: Proportional assignment is a flexible method that can be adapted to different situations and contexts. For example, it can be used to allocate resources in a classroom, an office, or a community center. The method can be adjusted to suit the specific needs of each situation, making it a versatile solution for resource sharing.

2. Accuracy: Proportional assignment ensures accuracy in resource sharing. It is based on objective criteria that can be easily measured and verified, which reduces the risk of errors or inaccuracies. This helps to ensure that each party receives a fair and accurate share of resources.

3. Efficiency: Proportional assignment is an efficient method that minimizes waste and maximizes the use of available resources. By ensuring that each party receives a proportional share of resources, the method helps to optimize the use of resources and prevent waste.

4. Transparency: Proportional assignment is a transparent method that promotes accountability and trust. Each party involved in the resource sharing knows exactly how the resources are being allocated and can verify that the process is fair and objective. This helps to promote transparency and build trust among the parties involved.

5. Cooperation: Proportional assignment promotes cooperation among the parties involved in the resource sharing. By ensuring that each party receives a fair share of resources, the method helps to build trust and promote cooperation. This can lead to more effective resource sharing and better outcomes for everyone involved.

Proportional assignment is a powerful tool for optimizing resource sharing and promoting fairness, equity, and cooperation. Its benefits are numerous and can be applied in different settings and contexts. By adopting proportional assignment, organizations can ensure that resources are allocated efficiently, accurately, and transparently, leading to better outcomes for everyone involved.

Benefits of Proportional Assignment - Proportional assignment: Pro Rata: Optimal Resource Sharing

Proportional assignment, also known as pro rata, is a fair and efficient way of distributing resources, such as time, money, or goods, among a group of people or entities based on their shares or contributions. However, proportional assignment also poses some challenges that need to be addressed to ensure that the allocation is effective, transparent, and equitable. These challenges include:

1. Complexity: Proportional assignment can be quite complex, especially when there are multiple criteria or factors that need to be taken into account, such as merit, need, or capacity. For example, suppose a company wants to distribute its annual bonus pool among its employees based on their performance, tenure, and salary level. In that case, it needs to develop a fair and transparent formula that considers these factors and assigns the appropriate share to each employee. This formula may involve different weights, thresholds, ceilings, or floors, which may be difficult to explain or understand.

2. Data quality: Proportional assignment requires accurate and reliable data to ensure that the shares are calculated correctly and fairly. However, data quality can be a challenge in some cases, particularly when the data is missing, incomplete, or outdated. For example, suppose a government wants to allocate its education budget among its regions based on their population, poverty rate, and literacy rate. In that case, it needs to rely on census data, surveys, or administrative records that may be subject to errors, biases, or manipulation.

3. Trade-offs: Proportional assignment often involves trade-offs between different objectives or stakeholders, such as efficiency, equity, or political feasibility. For example, suppose a charity wants to distribute its donations among its beneficiaries based on their income level, family size, and health status. In that case, it needs to balance the need for targeting the most vulnerable groups with the desire to avoid stigmatization, discrimination, or dependency. This trade-off may require some compromises or adjustments that may not satisfy everyone.

4. Implementation: Proportional assignment requires a robust and transparent implementation process to ensure that the shares are distributed according to the formula and criteria. However, implementation can be challenging in some cases, particularly when there are limited resources, capacity, or accountability. For example, suppose a school wants to allocate its teaching resources among its classes based on their size, level, and subject. In that case, it needs to have a clear and reliable system that monitors and adjusts the allocation regularly. This system may require some administrative, technical, or legal support that may not be available or affordable.

Proportional assignment is a powerful tool for optimizing resource sharing, but it also poses some challenges that need to be taken seriously. Addressing these challenges requires a collaborative and multidisciplinary approach that involves different stakeholders, such as policymakers, practitioners, academics, and beneficiaries. By doing so, we can ensure that proportional assignment contributes to a more just and sustainable world.

Challenges of Proportional Assignment - Proportional assignment: Pro Rata: Optimal Resource Sharing

Proportional assignment, also known as pro rata, is a method of allocating resources in a fair and proportional manner. It is used in various fields, from finance to politics, to ensure that everyone gets their fair share. In this section, we will explore some real-life examples of proportional assignment and how it helps in optimal resource sharing.

1. Finance: In the world of finance, proportional assignment is used to distribute dividends to shareholders. When a company earns profits, it may decide to distribute a portion of it among its shareholders. The amount of dividend each shareholder receives is proportional to the number of shares they hold. This ensures that every shareholder gets their fair share of the profits.

2. Politics: Proportional representation is a system used in many countries to elect representatives to the parliament. Under this system, the number of seats a political party gets in the parliament is proportional to the number of votes it receives in the election. This ensures that every vote counts and that the parliament is representative of the population.

3. Education: In schools and universities, proportional assignment is used to distribute scholarships and grants. For example, a scholarship may be awarded to students based on their academic performance, with the amount of scholarship being proportional to their grades. This encourages students to work hard and rewards them for their efforts.

4. Resource Allocation: Proportional assignment is also used in resource allocation to ensure that resources are distributed fairly and efficiently. For example, in disaster relief, resources such as food, water, and medical supplies are distributed among the affected population based on their needs. The amount of resources each person receives is proportional to their needs, ensuring that everyone gets the help they require.

5. Employment: Proportional assignment can also be used in the workplace to distribute workloads among employees. For example, a team leader may allocate tasks to team members based on their skills and workload capacity. This ensures that everyone is contributing equally and that no one is overburdened.

Proportional assignment is an important concept that ensures fair and optimal resource sharing. It is used in various fields, from finance to politics, and helps to create a more equitable society.

Examples of Proportional Assignment in Real Life - Proportional assignment: Pro Rata: Optimal Resource Sharing

When implementing proportional assignment in your organization, it is important to consider the various factors that may affect the success of the strategy. From the perspective of management, proportional assignment can help optimize the allocation of resources , reduce waste, and increase overall efficiency. However, from the perspective of employees, it may be viewed as unfair or unbalanced if not implemented properly. Therefore, it is crucial to approach proportional assignment with sensitivity and transparency.

To successfully implement proportional assignment in your organization, consider the following strategies:

1. Clearly communicate the rationale behind the implementation: It is essential to communicate the reasons for implementing proportional assignment to all stakeholders. This can help employees understand the benefits of the strategy and how it can improve overall operations.

2. Develop a fair system for allocating resources: When implementing proportional assignment, it is important to ensure that the system is fair and transparent. This can help alleviate concerns about unequal resource allocation and increase employee buy-in.

3. provide training and support : To ensure that employees understand how to use the proportional assignment system, it is important to provide training and support. This can help employees feel confident in their ability to use the system and increase overall adoption.

4. Monitor and adjust the system as needed: It is essential to monitor the effectiveness of the proportional assignment system over time. This can help identify areas for improvement and ensure that the system continues to meet the needs of the organization.

For example, a marketing department may implement proportional assignment to ensure that each team member has an equal opportunity to work on high-profile projects. By clearly communicating the reasons for the implementation, developing a fair system for allocating projects, providing training and support, and monitoring the system over time, the marketing department can ensure that the strategy is successful and well-received by employees.

Implementing Proportional Assignment in Your Organization - Proportional assignment: Pro Rata: Optimal Resource Sharing

It is evident that proportional assignment based on pro rata is an effective method for optimal resource sharing. The concept of pro rata has been widely used in various industries, including finance, insurance, and human resources. The application of pro rata in resource allocation has proved to be beneficial in numerous ways.

From the perspective of the resource providers, pro rata ensures that each provider receives a share of the resources that is proportional to their contribution. This ensures that all providers are fairly compensated for their investment, which encourages participation and promotes collaboration. From the perspective of the resource users, pro rata ensures that resources are allocated based on their level of need. This ensures that users receive resources that are commensurate with their requirements, which maximizes the value of the resources.

Here are some key implications of using proportional assignment based on pro rata:

1. Fairness: Pro rata ensures that resources are allocated fairly, based on the level of contribution or need. This eliminates biases and promotes equity.

2. Efficiency: Pro rata ensures that resources are allocated efficiently, ensuring that they are used optimally. This reduces waste and maximizes the value of the resources.

3. Flexibility: Pro rata is a flexible method that can be applied to various types of resources and industries. It can be used for allocating funds, time, or any other resource that can be measured.

4. Transparency: Pro rata ensures transparency in resource allocation, providing clear guidelines for how resources are allocated. This promotes accountability and encourages trust among stakeholders.

5. Collaboration: Pro rata promotes collaboration among stakeholders, as it ensures that all parties are fairly compensated for their contribution. This encourages participation and fosters a sense of community.

For example, suppose a company has a budget of $1,000 to allocate to three teams. If Team A contributes 40% of the work, Team B contributes 30%, and Team C contributes 30%, then each team should receive $400, $300, and $300 respectively. This ensures that each team receives a share of the budget that is proportional to their contribution, promoting fairness and collaboration.

In summary, proportional assignment based on pro rata is an effective method for optimal resource sharing. It promotes fairness, efficiency, flexibility, transparency, and collaboration among stakeholders. Its application can be beneficial to various industries and can be used for allocating different types of resources.

Conclusion and Future Implications - Proportional assignment: Pro Rata: Optimal Resource Sharing

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Pro Rata – What It Means and How to Calculate It

• Sean Cooney CFA

Table of Contents

Understanding pro rata, term definition.

Pro Rata is a Latin term that translates to “in proportion.” It describes the proportional allocation or assignment of a value, commonly used in finance, law, and business contexts. The principle of pro rata is applied when resources, time, or money need to be allocated fairly across different parties.

Business and Finance Context

In the business and finance world, pro rata allocation is often applied in various situations, such as investments, dividends, insurance claims, and liability distribution. For example, when a company issues dividends to its shareholders, the payment is distributed pro rata based on the number of shares each investor holds.

The pro rata formula :

Pro Rata Distribution = Pro Rata Share x Quantity of Related Item

To calculate the pro rata, you will mainly need to gather three data points:

• Number of “true” items in place
• Maximum quantity of total items
• Quality of related items

Pro Rata in Salary and Hourly Work

In the employment context, pro rata is mainly used for part-time workers or employees working reduced hours. Part-time employees often receive a salary that’s proportional to that of a full-time employee. This arrangement ensures fair compensation for part-time staff and makes it easier for employers to manage payroll expenses.

When calculating part-time workers’ salaries or overtime pay, the pro rata method takes the following factors into consideration:

• Hourly rate or salary of a full-time employee in the same position
• Regular hours worked by a part-time employee
• Standard weekly hours defined for a full-time employee 5 .

For example, if a full-time employee earns $800 a week for 40 hours of work and a part-time employee works 20 hours a week, the part-time employee’s weekly salary would be half that of the full-time employee (20 / 40) or $400.

In summary, the concept of pro rata helps ensure fairness and proportionality in various contexts, from investments to salaries. Understanding its applications and calculations is crucial for both employees and employers.

Methodology: Calculating Pro Rata

Pro rata formula.

Pro Rata is a Latin term that means “proportionally” and is often used to describe the fair and equitable distribution of an amount or value. The formula to calculate pro rata involves a simple ratio, where a value is divided proportionally based on the count or percentage required. For any pro rata calculation, the formula is:

Pro Rata Value = (Original Value * Required Percentage) / 100

Calculation Examples

• Pro Rata Salary : If an employee has an annual salary of $50,000 , but work part-time only 3 days a week (60% of a full-time work week), their pro rata salary would be calculated as follows:

Pro Rata Salary = (50,000 * 60) / 100 Pro Rata Salary = 30,000

The employee’s pro rata salary would be $30,000 .

• Pro Rata Rent : Consider a tenant moving into a rented apartment where the monthly rent is $1,000 and they will be occupying the place for only 20 days of the month. To calculate the pro rata rent for that month, first determine the daily rent:

Daily Rent = 1000 / 30 (total days in that month) Daily Rent = 33.33 (approx.)

Next, calculate the pro rata rent for the 20 days:

Pro Rata Rent = 33.33 x 20 Pro Rata Rent = 666.67 (approx.)

The tenant’s pro rata rent for the month would be $666.67 .

Pro Rata Calculator

A pro rata calculator can be a handy tool for determining pro rata values quickly and accurately. These calculators are available online and can provide instant results for various scenarios, including salary, rent, and other proportional allocations.

To use a pro rata calculator, simply input the required information, such as the original value, the percentage or ratio needed, and any relevant time frames (like days, weeks or years), and the calculator computes the pro rata value for you.

These calculators can be particularly helpful for more complex calculations or when dealing with multiple entities and ratios.

Pro Rata in Insurance and Dividends

Pro rata in insurance.

When it comes to insurance, the concept of pro rata is used to determine the premium amount for partial periods of coverage. In simple terms, it’s the proportional allocation of insurance premiums for the actual period of time you’ve been covered. For example, if you purchase an annual insurance policy but decide to cancel it six months into the policy, a pro rata refund could apply for the remaining six months.

Imagine you have an insurance policy with an annual premium of $1,200. If you decide to cancel halfway through the year, the insurance company will calculate your pro rata refund as follows:

In this case, you would receive a $600 refund for the unused portion of the policy.

Understanding Dividend Distribution

The pro rata principle is also applied in the context of dividend distribution. Companies often pay dividends to their shareholders as a reward for their investment. These dividend payments are distributed on a pro rata basis, which means each shareholder receives a proportionate share of the total dividend amount, based on their percentage ownership in the company.

Let’s consider a company with a total of 1,000 outstanding shares and plans to distribute $10,000 in dividends. A shareholder who owns 100 shares would receive 10% of the total dividend amount, as calculated below:

The dividend payment for this shareholder would then be:

In this example, the shareholder would receive $1,000 in dividend payments, which represents 10% of the total dividend distribution.

In conclusion, pro rata is an essential concept in the world of finance, as it helps ensure the fair allocation of resources in various situations, including insurance premiums and dividend distributions. By understanding how pro rata works and how it is calculated, you can make more informed decisions when dealing with insurance policies and investment opportunities.

Pro Rata Allocation and Fair Share

Concept of fair share.

The term “pro rata” (Latin for “in proportion”) is used to describe the allocation of a value or assignment in a proportional manner. It ensures fairness and equitable distribution among multiple parties involved. The pro rata principle helps people achieve their fair share in various contexts, from investments and ownership to rent and loan payments.

In order to calculate pro rata allocation, the following formula can be used:

Pro Rata Share = (Number of “True” Items / Maximum Quantity Possible)

Pro Rata Distribution = Pro Rata Share * Quantity of Related Item

Pro Rata in Investment and Ownership

Pro rata allocation plays a significant role in the world of investment and ownership. For example, when new shares of a company are issued in a rights offering, existing shareholders receive a number of new shares that is proportionate to their current holdings. This ensures that the investors’ ownership stakes and voting rights are maintained.

In the context of subscription, if a limited number of items (such as concert tickets) are offered to a large group of people, pro rata allocation ensures a fair distribution. Each applicant’s entitlement will be divided in proportion to the total available items, guaranteeing equitable access.

Pro Rata in Rent and Loan Payment

When it comes to rent, pro rata helps landlords and tenants determine the portion of a monthly rent to be paid when occupying a property for less than a full month. For instance, if a tenant moves in or out in the middle of a month, the rent payment for that month can be divided accordingly based on the number of days occupied.

The formula to calculate pro-rated rent is as follows:

• Find the daily rent: Monthly Rent / Number of Days in the Month
• Calculate the pro-rated rent: Daily Rent * Number of Days of Occupancy

In the context of loan payments, pro rata can be applied when there are multiple borrowers involved. Each borrower’s monthly payment amount is calculated based on their individual share of the loan. This ensures that borrowers contribute to loan repayments in proportion to their original stake in the loan.

Pro Rata in Resource and Budget Distribution

In the world of business and investment, the concept of pro rata plays a crucial role in the fair and equitable distribution of resources, such as funds, expenses, and incomes. This method ensures that each party involved in a project, partnership, or employment situation receives their fair share in a transparent and fair manner.

One common application of pro rata is in calculating part-time worker salaries. When an employee works fewer hours than a full-time worker, their pay is determined by calculating their proportional share based on the hours worked. This approach allows businesses to compensate their employees fairly while at the same time managing their wage expenses.

Another example where pro rata is vital is the allocation of project budgets among partners within a business. When multiple partners contribute to a joint investment or project, the available funds must be distributed appropriately, considering each partner’s investment. To achieve this goal, the pro rata distribution considers the percentage share of each partner in the project, and the total resources are then distributed accordingly.

The pro rata method is also significant in determining business partnership income distribution. For example, if a company earns a profit and needs to distribute it among its shareholders, the pro rata formula can be used to ensure each shareholder receives an amount proportional to their shares in the company.

Here’s a brief overview of the steps involved in calculating pro rata distributions:

• Identify the total number of “true” items or shares, such as outstanding shares or hours worked.
• Determine the maximum quantity of the total items or the resource to be distributed.
• Calculate the individual’s or party’s share of the item/resource.
• Multiply the individual share by the total item/resource quantity.

Pro rata is a valuable method to ensure the fair distribution of resources and budgets in various areas of business and investment. By using this approach, parties involved in projects, partnerships, or employment situations can achieve equitable distribution, minimizing conflicts and maximizing cooperation and efficiency.

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• Introduction

Pro-rata: Definition, How it Works, and Calculation

Strike Stock Market Guide Pro-rata: Definition, How it...

Pro-rata is a principle in finance that ensures fair and equitable distribution of shares, assets, profits and other entitlements based on ownership proportion. The term ‘Pro-rata’ comes from the Latin phrase, which means ‘in proportion’ and involves allocating something according to a predetermined ratio or formula. This article seeks to explain the definition of pro-rata and how it works in practice. It also provides examples of its application across sectors like banking, insurance, and the stock market.

Pro-rata finds application in a variety of corporate actions like rights issues, bonus share issuances, stock splits and acquisitions to avoid shareholder dilution while maintaining pre-emptive rights. It also promotes equitable distribution of assets during bankruptcy, settlement of claims and dissolution of partnerships or funds. Understanding pro-rata calculations is vital as it upholds the core principle of allocating benefits or obligations based on ownership percentage. The simplicity of pro-rata formulas masks the complexity involved, yet employing them ensures proportionality, transparency and fairness, which minimizes disputes.

What does Pro-Rata mean?

Pro-rata refers to the proportionate allocation or division of something between parties based on a predetermined ratio. Pro-rata is commonly used when additional shares are offered to existing shareholders. For instance, current shareholders could feel entitled to buy a certain amount of the new shares in order to preserve their current ownership stake if the firm issues new shares. This allows them to avoid dilution of their ownership stake. 

How does Pro-Rata work?

The working mechanism of pro-rata allocation is centred around the core principles of pre-defined ratios, proportionality and equality. The first step is defining the ratio or proportion based on which the pro-rata distribution will happen. For instance, in a bonus issue of 1:1, the ratio is 1 bonus share for every 1 share held. In a stock split of 1:2, the ratio is 2 split shares for every 1 pre-split share. The ratio is fixed beforehand based on fair criteria like existing shareholding, stake in an acquired company, etc. It sets out the proportion based on which shareholders’ entitlements will be calculated. Defining this upfront ensures transparency.

Once the ratio is set, individual shareholder entitlements are calculated using their existing shareholding. A shareholder who owns 1000 shares and the ratio is 1:5 is entitled to 200 shares, or 1000/5.

This entitlement rewards larger shareholders proportionately as per their stake. A 2% shareholder gets twice the entitlement compared to a 1% shareholder. This upholds the concept of proportional justice based on shareholding. The aggregate entitlements of all eligible shareholders are tabulated. In oversubscribed situations, the entitlements are proportionately reduced for all shareholders. The ultimate allotment ratio is 1000/5000 = 0.2x if there are 1000 shares available but 5000 total entitlements.

So, each shareholder’s entitlement was reduced proportionately to 20% of their calculated entitlement. This ensures equitable allotment in proportion to ownership. No set of shareholders suffers more than others. Any fractional entitlements are rounded off or dealt with as per regulations. Generally, fractions are rounded off to the lower integer or higher integer. The final pro-rata allotment is made to shareholders based on their proportionate entitlement ratios.

What is the Formula for Pro-Rata?

The basic pro rata formula is as stated below.

Allocation to shareholder = (Number of shares held by shareholder / Total number of shares) x Total allocation

This simple formula is adapted and applied in different situations in the stock market. 

Existing shareholders are entitled to subscribe for new shares in proportion to their current holdings when a firm announces a rights issue of new shares. The company will decide a ratio, say 1 new share for every 5 existing shares held. The pro rata entitlement for each shareholder will be calculated using the formula as stated below.

Rights entitlement = (Number of existing shares held / Ratio)

For instance, a shareholder holding 100 shares will be able to subscribe for 100/5 = 20 rights shares if a business with 1,000 outstanding shares announces a 1:5 rights issue, applying the pro rata calculation as stated below.

Rights entitlement = (100 shares held / 1 new share for every 5 existing shares)

             = 100/5 = 20 shares

The total number of new shares issued will be equal to the total number of existing shares/ratio. In this case, 1,000/5 = 200 new shares.

A dividend is paid to shareholders according to their holdings when a firm declares one. The pro rata formula for calculating the Dividend per share is given below.

Dividend per share = (Total dividend / Total outstanding shares)

A company’s Dividend per share is Rs. 50 if it declares a Rs. 50,000 total payout, and there are 1,000 outstanding shares.

The total dividend received by each shareholder is stated below.

Total Dividend = Number of shares held x Dividend per share

So, a shareholder with 100 shares will receive 100 x Rs. 50 = Rs. 5,000 as dividend.

Bonus shares are allocated to existing shareholders in proportion to their holdings. The pro rata formula for the bonus issue is given below.

Bonus shares = (Number of shares held / Bonus ratio) 

A corporation will issue one bonus share to each shareholder for each share owned if it announces a 1:1 bonus issue. So, a shareholder with 100 shares will receive 100 bonus shares.

In a 1:2 ratio, a shareholder with 300 shares will receive 300/2 = 150 bonus shares.

The total number of bonus shares issued is calculated below.

Total bonus shares = Total existing shares / Bonus ratio

So, in a 1:1 bonus issue of a company with 1,000 outstanding shares, the total bonus shares will be 1,000.

Sometimes, in a rights issue, not all shareholders subscribe to their full entitlement to rights shares. This leads to the subscription issue. In such cases, the unsubscribed portion is allocated to shareholders who have applied for additional shares over their rights entitlement. This is done on a pro-rata basis.

The pro rata allocation is based on the ratio of additional shares applied by the shareholder and the total additional shares applied for.

In the event that a rights issue had 100 shares that were not fully subscribed and that Shareholders A and B had applied for 50 and 100 additional shares, respectively, 33 and 67 shares of the unsubscribed 100 shares, respectively, would be distributed to Shareholder A, who had applied for 50 and 100 additional shares, in accordance with their respective ratios of additional applications.

So, the unsubscribed 100 shares will be allocated between A and B in the ratio of their additional applications.

A proportional distribution of shares is made to investors in an initial public offering (IPO) in the event that the issue is oversubscribed. SEBI guidelines specify the exact pro rata allotment rules.

The shares are allocated in the ratio of shares applied for to total shares applied under each category of investors. The formula is as follows.

Allotment to investor = (Shares applied by investor / Total shares applied in category) x Total shares allotted to category

This ensures a fair allotment of shares when there is excess demand in an IPO. The allotment under each investor category (retail, HNI, QIB) is done separately.

In the case of open-ended mutual funds, unit holders redeem their units at any time. Redemptions are handled on a pro-rata basis in the event that the total number of redemptions made on a given day surpasses the liquid assets of the fund.

The formula is given below.

Pro rata redemption = (Units being redeemed / Total units being redeemed) x Liquid assets available

This guarantees equitable distribution in the event that redemptions surpass available liquidity. Partially redeemed requests are carried forward to the next day.

How to Calculate Pro-Rata?

To calculate the pro-rata allocation in the stock market, gather each investor’s contribution amounts and time periods, calculate total contributions on a uniform basis, determine ownership percentages, and allocate end value based on proportional ownership.

Gather the relevant financial data needed for the pro-rata Calculation. This includes the total value of the investment or asset pool, the individual contribution amounts of each investor or party entitled to the asset, and the time period for which each investor contributed capital. 

For example, suppose three investors contribute to a pooled investment fund over the course of a year. Investor A contributed Rs. 50,000 for the full year. Investor B contributed Rs. 75,000 for 6 months. Investor C contributed Rs. 100,000 for 3 months. The total value of the fund at year-end is Rs. 500,000.

Calculate the total capital contributed by all investors over the time period. In this example, Investor A contributed for 12 months, Investor B for 6 months, and Investor C for 3 months. Convert each investor’s contribution to a monthly amount by dividing by the number of months they participated. 

Investor A: Rs. 50,000 / 12 months = Rs. 4,167 per month 

Investor B: Rs. 75,000 / 6 months = Rs. 12,500 per month

Investor C: Rs. 100,000 / 3 months = Rs. 33,333 per month

Add up the monthly contributions to get the total capital contributed on a monthly basis. 

Rs. 4,167 + Rs. 12,500 + Rs. 33,333 = Rs. 50,000 total monthly contributions

Determine each investor’s pro-rata share of the total fund by dividing their total contribution amount by the total contributions.

Investor A: Rs. 50,000 / Rs. 50,000 = 20% 

Investor B: Rs. 75,000 / Rs. 50,000 = 30%

Investor C: Rs. 100,000 / Rs. 50,000 = 50%

So Investor A contributed 20% of the total capital, Investor B 30%, and Investor C 50%. 

Allocate the end value of the investment fund (Rs. 500,000) pro-rata based on each investor’s ownership percentage.

Investor A: 20% x Rs. 500,000 = Rs. 100,000

Investor B: 30% x Rs. 500,000 = Rs. 150,000

Investor C: 50% x Rs. 500,000 = Rs. 250,000

What are the advantages of Pro-Rata?

The advantages of pro-rata are that it provides proportional allotments to shareholders in corporate actions like rights issues, bonus shares, stock splits, and demergers based strictly on ownership percentage to ensure fair treatment, reduce dilution, maintain pre-emptive rights, prevent discrimination against minorities, and promote equity in the stock market.

1. Rights Issues 

One common use of pro-rata in the stock market is for rights issues. A firm sometimes issues new shares if it needs to raise more money. Existing shareholders often have the right of first refusal to buy these new shares in proportion to their existing shareholdings. This allows current shareholders to maintain their ownership percentage and avoid dilution. The new shares are offered to eligible shareholders on a pro-rata basis. Using a pro-rata mechanism ensures the rights issue is fair for all existing shareholders.

2. Open Offers

Similarly, open offers involve issuing new shares to raise capital. Under Indian regulations, open offers must be made to all shareholders on a pro-rata basis. The offer must be proportional to the number of shares already owned. This prevents selective allotment of shares to certain large shareholders and ensures the process is equitable. Pro-rata open offers give equal opportunity to all shareholders.

3. Bonus Issues

A corporation might distribute free bonus shares to current owners when its cash reserves increase. Indian companies often issue bonus shares instead of dividends. The bonus issue of shares is done on a pro-rata basis. Shareholders receive bonus shares in proportion to their current shareholding. This maintains the ownership percentage of all shareholders. Pro-rata bonus issues are advantageous as they reward shareholders without altering proportional ownership.

4. Stock Splits 

Stock splits increase the number of shares outstanding by splitting each share into multiple shares. This reduces the market price and increases liquidity. Stock splits require changing the number of shares on a pro-rata basis. Every shareholder will receive two shares for each share they previously held in the event of a 1:2 split. This leaves the ownership percentage unchanged after the split. Pro-rata stock splits ensure fairness and proportionality.

5. Preferential Allotments

Preferential allotments allow private allotment of shares to select investors. To balance the interests of existing shareholders, Indian regulations also require preferential allotments to be made to existing shareholders on a pro-rata basis. The pro-rata rule compels companies to allot shares to existing holders proportionally, along with the preferential allotment. This reduces dilution and preserves shareholder interests.

6. Oversubscription in IPOs

In an oversubscribed initial public offering (IPO), pro-rata allotment ensures a fair allocation of shares. Only 50% of the shares asked for will be awarded to each bidder in an IPO if bids exceed the number of shares offered. The remaining shares are allotted on a proportionate basis. Pro-rata allotment is essential in oversubscribed IPOs to provide equal treatment to all applicants.

7. Takeover Offers 

During acquisitions, substantial shareholders must provide an exit opportunity to minority shareholders. Takeover offers made to minority shareholders must be on a pro-rata basis. Shareholders sell their pro-rata portion of shares to the acquirer. This allows equitable divestment for shareholders who do not retain a stake post-acquisition.

8. Demergers and Spin-offs

In demergers, as a company splits into separate companies, shares of the new entities are distributed pro-rata to existing shareholders. Similarly, spin-offs also allocate shares in the newly spun-off entity on a pro-rata basis to provide proportional ownership. Pro-rata mechanisms enable restructuring while protecting shareholder interests.

9. Liquidation Value Distribution 

The revenues of an asset sale made by a bankrupt firm are allocated among shareholders according to their percentage of ownership. Preferential payouts are avoided by adhering to pro-ratas. This prevents discrimination against minority shareholders during liquidation payouts.

10. Mutual Funds

In mutual funds, all investors receive proportionate units based on their investment. No preferential treatment or discretion occurs. Payout of dividends to unit holders occurs pro rata at the time of declaration. Pro-rata mechanisms underline the fairness and equality in mutual fund investments. 

11. Venture Capital Investments

Venture capital firms often invest together in startups. The investment round involves complex pro-rata calculations to determine proportional allotments to each investor based on their relative participation. Pro-ratas ensure pre-emptive rights to existing investors are balanced with allotments to new investors.

The use of pro-rata principles across corporate actions and investment scenarios promotes equitable treatment of shareholders and upholds fairness in capital market operations.

What are the disadvantages of Pro-Rata?

The disadvantages of pro-rata allotment are that despite aiming to ensure fairness, pro-rata mechanisms potentially dilute minority shareholdings, compel distress sales, increase costs, reduce liquidity, and fail to provide proportionate control to retail investors owing to their negligible voting rights and lack of access to information and resources.

1. Rights Issues

In rights issues, following pro-rata sometimes compels small investors to invest more funds to subscribe to their share of rights entitlement. Retail investors with limited capital are not able to participate fully. Their shareholding gets diluted if they do not take up the rights issue offer. Pro-rata rights issues lead to forced selling by small investors.

2. Open Offers 

Pro-rata requirements in open offers imply retail investors also have to participate proportionately. They sometimes lack the financial capacity to subscribe to their share of the offer. The inability to participate dilutes their ownership stake. Pro-rata open offers sometimes worsen wealth inequality as larger investors gain higher allotments.

Though bonus issues appear beneficial for all shareholders, they reduce the market price of shares due to the increased number of shares. This lowers the overall portfolio values of small investors. A high frequency of bonus issues sometimes indicates suboptimal capital allocation by the company.

4. Preferential Allotments 

The mandatory pro-rata allotment alongside preferential allotment still dilutes the ownership of minority holders. Pro-rata allotment only reduces the extent of dilution but does not prevent it. Retail investors get a proportionate yet small number of shares.

5. Oversubscribed IPOs

In oversubscribed IPOs, the pro-rata allocation method limits allotment to small investors. Since applications are capped at a maximum bid lot, large bidders gain in the pro-rata allotment. Retail investors receive only a tiny proportion of shares.

6. Takeover Offers

Though mandatory, pro-rata takeover offers do not benefit minority shareholders much. The offer price is usually unattractive. Investors are compelled to sell out at a discount to the market price. For minority holders, a forced exit at an unfavourable valuation is a loss.

7. Spin-offs 

In spin-offs, pro-rata distribution of new shares sometimes does not appeal to small investors. They have limited capacity to hold shares in multiple new entities post-restructuring. Faced with no choice, retail investors end up selling spin-off shares at a loss.

8. Voting Rights

Despite owning shares on a pro-rata basis, small shareholders have limited voting rights due to their negligible stake. They cannot influence any shareholder resolution. Pro-rata ownership does not empower minority investors with proportionate control. 

9. No Role in Decision Making

Adhering to pro-rata allotment does not imply any role in corporate decision-making for minority holders. They do not participate in rights issues or preferential allotment of IPO pricing decisions, which impact their investment value. Pro-rata ownership does not equal pro-rata control.

10. Indirect Expropriation 

Company insiders make strategic decisions that favour themselves while technically following pro-rata norms that appear fair. For instance, IPO pricing is sometimes deliberately set too high. Or rights issue prices are sometimes too low to force minority shareholders to sell out. Pro-rata mechanisms potentially mask indirect expropriation of minority interests. 

11. Reduced Float for Trading

Frequent rights issues, bonus issues and stock splits increase the number of shares but reduce the public float available for trading. This negatively impacts the stock’s liquidity and price discovery. For minority holders, liquidating their investment becomes tougher despite owning shares on a pro-rata basis.

12. Demergers

In demergers, small investors sometimes get shares in an entity they did not want to own in the first place. They are allotted shares due to the pro-rata rule. Given no choice, they end up selling these shares quickly at a loss. Forced ownership followed by distress sale causes value erosion.

Participating in rights issues, open offers, and takeover bids on a pro-rata basis has transaction costs for minority shareholders. Costs like brokerage, demat charges and taxes incurred repeatedly erode the investment returns of retail investors over time despite allotments being proportional.

14. Information Disadvantage

To decide whether to subscribe to a pro-rata rights issue or open offer, minority shareholders need information on valuation, future prospects, investment risks and so on. Lack of expertise, resources, and access puts small investors at a disadvantage compared to institutional investors who participate in pro-rata allotments.

15. Regulatory Arbitrage 

Promoters sometimes allocate shares to foreign entities where securities regulations are weaker, even while following pro-rata norms in the home country. For instance, shares are allotted to offshore subsidiaries through ODIs without reducing domestic pro-rata allotment. Regulatory arbitrage defeats the purpose of pro-rata allotment.

16. Non-voting Shares

Companies issue super-voting rights shares or non-voting shares to founders and management in a pro-rata manner. This gives them control that is disproportionate to their economic ownership. Minority shareholders sometimes own ordinary shares pro-rata but have negligible voting power due to the dual-class share structure. 

Lack of financial capacity, voting power, information access, regulatory gaps and costs involved in participating in pro-rata corporate actions present major disadvantages for small investors.

What is an example of Pro-Rata?

One common example of pro-rata in the Indian stock market is in the allocation of shares during an Initial Public Offering (IPO). A business must select how many shares to allot to various investor groups, such as retail investors, high-net-worth people, institutional investors, etc., when it chooses to list its shares on the stock exchange through an initial public offering (IPO). For example, let’s take the case of ABC Ltd, a hypothetical Indian company going for an IPO. ABC Ltd has decided to offer 10 crore shares to the public through the IPO. Out of this, 2 crore shares are reserved for retail investors, 4 crore for institutional investors like mutual funds and insurance companies, and the remaining 4 crore for high-networth individuals. This determination of the number of shares for each investor class is done on a pro-rata basis as a percentage of the total IPO size. 

In terms of actual allocation, not every applicant will receive the quantity of shares they sought if the IPO is overcrowded. The shares will be allotted on a proportionate basis.

What is Pro-Rata for Interest Rates?

Pro-rata interest calculations are commonly used to determine interest obligations in finance situations such as early bond/CD redemption, partial period loan interest accrual, interest on fractional shares, and adjustable rate mortgages. The key point is that pro-rata looks at the actual time an investment or loan was outstanding when calculating interest rather than simply applying the full-term interest rate. This provides a fair and accurate determination of interest owed based on the time period the Principal was actually held or borrowed. Pro-rata allows for proportional interest calculations in situations where interest rates change mid-period or the Principal is held for less than the full original term.

The pro-rata interest formula calculates interest owed as the original principal amount multiplied by the stated interest rate and the fraction of the total time period that the Principal was actually held or borrowed. The formula to calculate pro-rata interest is as stated below.

Pro-Rata Interest = Original Principal x Stated Interest Rate x (Time Held / Total Time Period)

Where the original Principal is the initial investment or loan amount, the Stated Interest Rate is the full-term interest rate percentage, the Time Held is the actual time the Principal was invested or borrowed, and the Total Time Period is the full term of the investment or loan.

To demonstrate, say an investor purchases a 2-year bond with a Rs. 10,000 principal and a 4% coupon rate. After 1 year, the bond is sold. The pro-rata interest is given below.

Original Principal: Rs. 10,000

Stated Interest Rate: 4% 

Time Held: 1 year

Total Time Period: 2 years

Pro-Rata Interest = Rs. 10,000 x 0.04 x (1 / 2) = Rs. 200

Rather than the Rs. 400 full 2-year interest, the investor owes Rs. 200 in interest for the partial 1-year period held.

What is Pro-Rata for Dividend Shares?

Pro-rata calculations are used to determine proportional dividend payments in cases such as for shares bought or sold between dividend dates; dividends are prorated based on the portion of the period the shares were owned. With dividend reinvestment purchases, any additional fractional shares purchased between dividends are entitled to a pro-rata dividend. In stock spin-offs, the divided shares sometimes have a split dividend entitlement requiring pro-rata Calculation to determine the proportional payment. Similarly, post-stock split fractional shares also get pro-rated dividend payments based on the time held. The key point is that dividends are not “all or nothing” based on a single holding date but rather divided mathematically based on the time period the shares were actually owned. Pro-rata ensures fair proportional dividend payments in these situations.

The pro-rata dividend payment is calculated by multiplying the number of shares owned by the Dividend per share and the fraction of the total dividend period the shares were held. The formula to determine pro-rata dividend entitlement is given below.

Pro-Rata Dividend = Shares Owned x Dividend Per Share x (Days Held / Total Days in Period)

Where Shares Owned are the Number of shares entitled to the Dividend, Dividend Per Share is the full dividend amount per share for the period, Days Held are the number of days the shares were held in the period, and Total Days in the Period are the total days from dividend payment to payment.

For example, say an investor buys 75 shares 30 days before the next dividend date. The Dividend is Rs. 0.50 per share annually, paid quarterly. So, for the 90-day quarter, the Dividend will be as given below.

Shares Owned: 75

Dividend Per Share: Rs. 0.50 

Days Held: 30

Total Days in Period: 90

Pro-Rata Dividend = 75 x Rs. 0.50 x (30 / 90) = Rs. 12.50

Instead of the Rs. 37.50 for the full quarter (75 shares x Rs. 0.50), the pro-rata Calculation determines the proportional Dividend owed based on the 30 days held.

What is Pro-Rata for Insurance Premiums?

Pro-rata is a method of precisely calculating insurance premiums based on the actual number of days of coverage provided. Rather than dividing premiums into equal instalments or rounding to the nearest month, pro-rata looks at the exact coverage period. Common situations involving pro-rata premium calculations include client-initiated mid-term cancellations, where the refunded premium is prorated for the remaining partial year; insurer-initiated cancellations, where unearned premiums are refunded on a daily pro-rata basis; changes to the risk profile mid-term, such as different deductibles or moving residences; instalment payments, where each payment is proportional to the days of coverage in that period; and short-term event policies that only charge for the necessary coverage days rather than a full policy period. The goal of pro-rata is to divide insurance premiums proportionally and fairly based on the number of days the policy was in effect.

The pro-rata insurance premium is calculated by multiplying the annual policy premium by the ratio of the number of days covered to the total number of days in the policy period. The standard formula to determine pro-rata insurance premiums is given below.

Pro-Rata Premium = Annual Policy Premium x (Days Covered / Total Days in Policy Period)

Where the annual Policy Premium is the full premium for the entire policy term, Days Covered are the actual days insured during the policy term, and Total Days in the Policy Period are the total days from inception to expiration of the policy term.

For instance, the premium for a 365-day house insurance policy with a Rs. 2,000 yearly premium that is terminated after 90 days of coverage is determined as follows.

Annual Policy Premium: Rs. 2,000

Days Covered: 90 

Total Days in Policy Period: 365

Pro-Rata Premium = Rs. 2,000 x (90 / 365) = Rs. 495

What is Pro-Rata in Law?

Pro-rata, in law, determines a party’s share based on a calculated ratio. Rather than an equal division, pro-rata calculates specific percentages owed based on quantifiable factors like time, contribution, fault, or ownership stake. Key to pro-rata is mathematical precision in allocating legal rights and duties fairly to all interested parties. It aims to award exact percentages based on relative quantitative factors, not just equal splits.

What is Pro-Rata in Accounting?

Pro-rata analysis is used in accounting to allocate revenues, expenses, assets, and taxes properly across time periods and entities. For projects spanning fiscal years, revenues are recognized pro-rata as performance obligations are satisfied. Expenses like rent and insurance are accrued pro-rata into the correct periods based on time. Depreciation expense is calculated pro-rata based on an asset’s useful life rather than taken as a lump sum when acquired. For shared assets and costs, valuation and allocation are done pro rata based on ownership percentages or usage metrics. Similarly, multi-region entities apply pro-rata calculations to apportion tax liabilities across jurisdictions based on revenues or assets. Using pro-rata allows for a more accurate representation of financial performance over time.

The pro-rata amount is calculated by multiplying the total amount by the ratio of the relevant metric to the total metric.

Pro-Rata Amount = Total Amount x (Relevant Metric / Total Metric) 

Where the Total Amount is the full amount being allocated, the Relevant Metric is the entity’s proportional share, and the Total Metric is the total base for allocation.

For example, say total supplies expense last month was Rs. 5,000. Department A had 20 employees while Department B had 10 employees. The 30 total employees is the usage base. So, the pro-rata allocation is given below.

Department A: 

Total Amount = Rs. 5,000

Relevant Metric = 20 employees 

Total Metric = 30 employees

Pro-Rata Supplies Expense = Rs. 5,000 x (20/30) = Rs. 3,333

Department B: 

Pro-Rata Supplies Expense = Rs. 5,000 x (10/30) = Rs. 1,667

Can you apply Pro-Rata in Investment?

Yes. Pro-rata is a principle that can be applied in investment contexts to allocate gains, losses, fees, etc., proportionately based on ownership stake. Pro rata distribution of profits and losses is possible when several investors jointly hold an asset, such as a fund or stock. In the event that Investor A holds 60% of a stock and Investor B owns 40%, A would receive 60% of any dividends or price increases in the shares, with B receiving 40%. Likewise, in the event that the stock’s value drops, losses would be distributed according to ownership interest pro rata. This ensures each investor shares proportionately in the ups and downs of the investment based on their ownership percentage.

Can you use Pro-Rata in the Stock Market?

Yes, pro-rata is used in the stock market. Pro-rata is commonly used when allocating shares during a rights issue. Existing shareholders are granted the opportunity to purchase more company shares in proportion to their current holdings when a firm conducts a rights issue to raise extra capital. The allocation of these rights shares is done on a pro-rata basis. The use of pro-rata allocation in rights issues is done to be fair to all existing shareholders of the company.

What is the difference between Pro-Rata and Prorated?

The main difference between pro-rata and prorated is that pro-rata refers to the proportionate allotment of something like shares to existing shareholders based on their current ownership percentage, while prorated refers to an amount that has been divided or calculated on a proportional basis over a specific period of time.

Arjun Remesh

Head of Content

Arjun is a seasoned stock market content expert with over 7 years of experience in stock market, technical & fundamental analysis. Since 2020, he has been a key contributor to Strike platform. Arjun is an active stock market investor with his in-depth stock market analysis knowledge. Arjun is also an certified stock market researcher from Indiacharts, mentored by Rohit Srivastava.

Shivam Gaba

Reviewer of Content

Shivam is a stock market content expert with CFTe certification. He is been trading from last 8 years in indian stock market. He has a vast knowledge in technical analysis, financial market education, product management, risk assessment, derivatives trading & market Research. He won Zerodha 60-Day Challenge thrice in a row. He is being mentored by Rohit Srivastava, Indiacharts.

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• Pro Rata Allotment

A company may receive applications for shares more than the number of shares it has offered to the public. This is known as over-subscription of shares. Usually, the companies that are financially strong, have a good reputation in the market or have profitable future prospects, receive over-subscription of shares. Thus, Pro Rata Allotment becomes necessary.

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In the case of over-subscription, it is not possible for the company to allot shares to every applicant in the number that he desires.  The company needs to allot the shares in a proper manner. The company has the following three alternatives:

• Accept some applications in full and reject the others totally.
• Make Pro-Rata Allotment.
• Adopt a combination of the above two.

Usually, the company does not consider the multiple applications from the same person. Also, generally a company takes the third course of action. The problem of accounting of over-subscription is usually resolved at the time of allotment of shares.

Pro-rata allotment refers to the allotment of shares in proportion of the shares applied for. When a company makes pro-rata allotment, it adjusts the excess money received at the time of application firstly, towards the allotment and then towards calls.

It refunds any surplus left after adjusting the amount towards allotment and calls to the applicants. The company advertises the allotment procedure in the leading newspapers .

For example, AB Ltd. offers 10000 shares to the public. The issue was heavily oversubscribed . It receives applications for 20000 shares.

When the company decides to allot the shares at pro-rata basis, then it has to allot 10000 shares to the applicants of 20000 shares. Thus, the ratio will be 20000:10000 i.e. 2:1. Hence, an applicant for 2 shares will receive 1 share. This is Pro-rata allotment.

Journal Entries in various cases

1. when a company decides to accept some applications in full and reject the other totally, 2. when a company makes pro-rata allotment,  3.  when the company adopts a combination of the above two..

In this case, all entries except at the time of transferring the application amount being due are same. The entry at the time of allotment will be:

Solved Example on Pro Rata Allotment

Arihant Ltd. Co. issues 100000 equity shares of face value of ₹10 on 1 st June 2018 at 20% premium. The arrangements for payment are:

June 1, 2018: On Application ₹2

July 1, 2018: On Allotment including Premium ₹7

September 1, 2018: On First and final call ₹3

The company receives applications for 285000 shares. It deals with them in the following manner:

• Applicants for 25000 shares receive the full allotment.
• The applicants for 225000 shares receive one share for every three shares applied for on pro-rata basis.
• It rejects the applications for 35000 shares.

The company duly receives the entire amount. Pass necessary journal entries.

Journal Entries

In the books of Arihant Ltd.

Working Notes:

Calculation of adjustment of application money

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Pro tanto is Latin phrase meaning “to that extent” or “for so much,” and it often refers to a partial satisfaction of a debt or claim. Example: In a negligence suit with multiple tortfeasors , a plaintiff may settle with one of the defendants and then pursue further action against the remaining defendants. That settlement is referred to as a “pro tanto settlement.” The remaining defendants are entitled to offset the pro tanto settlement against any judgment entered against them. For example, in Ex parte Goldsen , two defendants were liable for damages sustained by the plaintiff as a result of a car accident. The second defendant was able to offset the $76,898 judgment against him by $20,000, the amount of the pro tanto settlement with the first defendant.

[Last updated in July of 2020 by the Wex Definitions Team ]

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CLICK HERE TO RETURN TO PREVIOUS PAGE The following is a comprehensive overview of contracts. Contracts/Written Statements Pro rata contracts/Fixed term contracts Non-casual part time teaching contract Casual part time teaching contract Contracts of indefinite duration

Contracts/Written Statements

• Permanent members in the ETB sector are employed under memo V7.  
• Permanent wholetime teachers in the Community and Comprehensive and Voluntary Secondary sectors do not have a written contract but are employed under terms no less favourable than memo V7  
• By definition, a permanent wholetime teacher is deemed to be fully qualified

Pro Rata Contracts/Fixed Term Contracts

• Teachers on fixed term pro rata contracts are employed for the full year, meaning they are paid a regular salary until August 31st. They are also paid during holidays.  
• If you are a fully qualified part-time teacher (i.e. with fewer than 22 teaching hours per week) and have been engaged to teach for a specified number of hours per week over the course of the full school year with a start date not later than the first day of term following the mid-term break) you are entitled to a pro-rata contract.  
• A fixed term contract is a contract of employment for a specified period – usually 1st September to 31st August – and must be signed by both the employer and the employee.  
• You are entitled to a fixed term contract in written form.  
• The standard contract is appended to Circular Letters PPT 19/03 (Community and Comprehensive schools) and PPT 20/03 (VECs).  
• To be entitled to a pro-rata contract you must have been appointed following a formal selection process. This process involves advertisement of the position in the national press and competitive interview by a properly constituted interview board.  
• If you otherwise satisfy the conditions for award of a pro-rata contract (i.e. if you are qualified and have specified hours over the course of the school year) but have not been appointed following a formal selection process, you should contact your TUI Workplace Representative and, assisted by her/him, ask your employer to advertise the position and make an appointment following a formal selection process. There is a risk in this that you might not be appointed but the cost to you of not pursuing the matter is considerable.  
• Do not sign any contract without consulting your Workplace Representative  
• Keep a copy of each contract your receive and all related documentation/correspondence  
• If, before the first day of term following the mid–term break, additional teaching hours are added to your weekly timetable – as sometimes happens after the commencement of the school year when a school’s timetable eventually “settles” - your contract is augmented to take account of those hours  
•  Any further hours – undertaken on an occasional basis - that are worked by a pro-rata contracted teacher during the school year will be paid at an hourly rate calculated by dividing the sum of your point on the CBS and your qualifications allowances by 735 (i.e. the number of teaching hours in the school year of a permanent whole time teacher)  
• If you have a fixed term pro-rata contract your salary for the school year is based on your weekly hours as a proportion of the weekly wholetime hours (22). To calculate your annual salary, you apply that proportion to the sum of your point of the CBS plus your qualifications allowances.

Full salary details are available on the TUI website or in the relevant section of the TUI diary/handbook. Non-casual Part-time Teaching contract

• A fully qualified part-time teacher who is employed to teach for a period in excess of 150 hours during the school year but for less than the course of a full school year is classified as a “non-casual part-time teacher” and is entitled to a non-casual part-time teaching contract. Also, a fully qualified part-time teacher who is employed to teach for a period of at least 22 successive weeks during the school year but for less than the course of a full school year is also classified as a non-casual part time teacher, even if the sum of the hours to be worked in that period does not exceed 150.  
• As such a teacher, you will be paid at an hourly rate calculated by dividing the sum of your point on the CBS and your qualifications allowances by 735 (i.e. the number of teaching hours in the school year).  
• If you are employed to replace a teacher on maternity leave or extended sick leave you may fall within this category.

Casual part-time teaching contract

• If it is anticipated that a teacher will work no more than 150 hours and/or for fewer than 22 weeks in the course of the school year, the hours worked, to a maximum of 150, will be paid at a fixed hourly rate.  
• If, as such a teacher, you work for more than 150 hours in the school year each additional hour in excess of 150 will be paid at an hourly rate calculated by dividing the sum of your point on the CBS and your qualifications allowances by 735 (i.e. the number of teaching hours in the school year).  
• This type of contract applies in cases in which the work arises only on an intermittent basis and where the employer may reasonably expect that the hours worked will not exceed 150 in the course of the school year. (Please note that if you are employed to work specified hours for 22 weeks or more you are entitled to a non-casual part-time contract as opposed to a casual part time contract).

Contracts of Indefinite Duration

Following vigorous campaigning by TUI and the other teacher unions, ‘expert groups’ were established as part of the Haddington Road Agreement to investigate and tackle the crisis of casualisation in teaching and lecturing. At second level, the expert group reported in September 2014 – the Ward report – and details on the implementation of its seven key recommendations are set out in circular letter 24/2015 , published in March 2015. This circular letter applies to all TUI members contracted as teachers in settings including post-primary schools, colleges of further education, Youthreach and adult education settings. Click here to download a detailed guide to circular letter 24/2015 How does a teacher get a CID? Key Points under circular letter 24/2015

• A teacher will qualify for a Contract of Indefinite Duration (CID) after a period of continuous employment in excess of two years – ie upon commencement of a third year of continuous employment, subject to certain conditions. This is significantly better than the statutory provision and improves the initial position negotiated under the HRA. (Under fixed-term worker legislation the qualifying period is four years and under the HRA it had been 3 years for teachers).  
• Hours held by a fixed-term teacher who is covering for a teacher on career break or for a teacher on secondment will now be counted towards their CID. The teacher will be placed on a redeployment panel immediately prior to the return of the teacher on career break / secondment. In such circumstances the teacher will remain in receipt of his/her income/salary.  
• The hours of the CID will be the hours worked in the full school year prior to the issuing of the CID (i.e. the qualifying year), regardless of the source of the hours.  
• A teacher who has qualified for a CID after two years will be liable for redeployment if their subjects become surplus to the curricular requirements of their school.  
• Where a qualified teacher holds a part-time CID and is working additional hours under a separate fixed-term contract, they will receive a CID for these hours after a continuous period of employment (in the hours) in excess of one year, if the hours continue to be viable and available under the allocation.  
• All teachers on their first fixed-term contract will have their positions terminated at the end of year 1. The position will automatically be re-advertised and a new recruitment process undertaken. Therefore, the teacher will need to apply for and interview for the position at the end of year 1.

Entitlement to a CID - for all or some of the hours worked - does not accrue in circumstances where there are legitimate ‘objective grounds’ for the fixed term contract. Under circular letter 24/15 , covering for a teacher on career break or secondment is no longer considered to be an objective ground for not awarding a CID. 

In addition, if a teacher holds a CID for at least 18 hours per week and agrees in writing to be timetabled up to 22 hours per week, s/he will then be timetabled and paid for 22 hours per week. (See CL 11/09)

If a teacher is of the view that s/he has an entitlement to a CID, in view of the above information, and has been refused a CID by management, there is right of appeal to the Adjudicator under the terms of CL 30/2018 . There is also a right of appeal to the Adjudicator if you have received a lesser number of hours in your CID than the number of hours held in the third year. There is a four week period from the date of refusal/receipt of the CID to appeal to the Adjudicator. All appeals should be processed through TUI Head Office. There is also an option of having refusal of a CID dealt with by a Rights Commissioner who will consider whether the legal entitlement to a CID under the terms of the Protection of Employees (Fixed Term) Act 2003 has been denied. There is a six month time frame for lodging such complaints. These complaints should be processed through TUI Head Office. It should be noted that under the Act entitlement to a CID arises on the fourth anniversary of appointment.

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Pirates 3B Ke’Bryan Hayes scratched with lower back tightness. Grandal starts rehab assignment

Pittsburgh Pirates’ Ke’Bryan Hayes hits a single during the first inning of a baseball game against the Philadelphia Phillies, Sunday, April 14, 2024, in Philadelphia. (AP Photo/Laurence Kesterson)

Pittsburgh Pirates third baseman Ke’Bryan Hayes throws to first base for an out during the first inning of an opening-day baseball game against the Washington Nationals at Nationals Park, Monday, April 1, 2024, in Washington. (AP Photo/John McDonnell)

Pittsburgh Pirates’ Ke’Bryan Hayes, left, is forced out at home by Baltimore Orioles catcher James McCann on a bases loaded fielder’s choice by Rowdy Tellez during the bottom of the ninth inning of a baseball game in Pittsburgh, Sunday, April 7, 2024. The Pirates won 3-2. (AP Photo/Gene J. Puskar)

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NEW YORK (AP) — Gold Glove third baseman Ke’Bryan Hayes was scratched from the Pittsburgh Pirates’ lineup Tuesday night against the New York Mets because of tightness in his lower back.

“It just kind of locked up on him a little bit trying to work out. He couldn’t get it really to release, so just out of the abundance of caution just going to make sure that we keep him down,” manager Derek Shelton said before his team’s 3-1 loss.

Jared Triolo shifted from second base to third and moved from sixth in the batting order to Hayes’ spot at No. 3.

Oneil Cruz, who had been scheduled for a night off against left-hander Jose Quintana, was inserted at shortstop. Alika Williams moved from shortstop to second base.

Hayes is batting .277 with no homers and seven RBIs.

In other injury-related news, Yasmani Grandal (left foot plantar fasciitis) began a rehab assignment Tuesday night with Triple-A Indianapolis. The 35-year-old catcher went 0 for 2 with a walk and an RBI. He was expected to play four or five innings, Shelton said, but there’s still no timetable for his return.

“As we kind of build up, we’ll have to go from there,” Shelton said. “He really has had no spring training, so we’ve got to make sure we get a spring training aspect there.”

Grandal, a two-time All-Star, is waiting to make his Pirates debut. He signed a $2.5 million, one-year contract in mid-February after spending the previous four seasons with the Chicago White Sox.

“We’ve been able to do everything with him. He’s been catching. He’s been getting at-bats off the machine. But he hasn’t played in a game,” Shelton said. “So we just need to get the game in. We need to get running in. We need to get him on the bases as much as possible.”

AP MLB: https://apnews.com/hub/mlb