When onboarding new contractors, if their start date is not the 1st of the month, you will need to select the First payment amount. This refers to the prorated amount for the first month's pay.
How do I calculate the prorated amount?
The most accurate way to calculate custom amounts and daily rates is by calculating based on working days during the pay period. So X month = X working days if the contract is 40 hours per week, so we assume 5x8 hour days.
The formula is as follows:
- Calculate the number of working days for a specific pay period (assuming 5x8 hour days per week)
- Divide the monthly Fee by the number of working days = Daily Rate
- Multiply the number of days worked * Daily rate = Final amount
Scenario
- Start date: Nov 14, 2022.
- Days worked in November: 13 days (Nov 14 - Nov 30)
- Monthly fee: $5000
Calculations are:
- Number of working days in November 2022: 22 days
- Daily rate: $227.27 ($5000/22)
- Amount to be paid: $2945.54 (227.27*13)