# What does the "First Payment Amount" Mean for Fixed Contractors?

## Definition

On Step 3 of the contractor's new hire flow, there is a question on "First payment amount." This question will appear under the following conditions:

1. You are hiring a contractor at a fixed rate
2. Their start date is not the first of the month

The "First payment amount" refers then to how you want to prorate the first month's payment.

## Proration

There are a number of different ways to prorate. The Oyster app uses the "daily rate" proration:

There are ~260 working days in the year. To calculate a daily pay rate, take total annual pay divided by 260. Then, you can multiply this daily rate against the number of working days during that pay period.

For instance, if a contractor is starting work on June 14, you would calculate the first payment amount for the period of June 14-30.

In this case, let's say the contractor would be paid:

• \$5,000 fixed pay per month, which is \$60,000 per year
• \$60,000 divided by 260 days = \$230.7692 daily rate

If the contractor is working 13 business days from June 14th - June 30th, then the "First payment amount" is \$3,000, which equals the daily rate (~\$230) times the number of working days  (13).