Hourly Wage vs. Salary: Understanding Your Earnings
Whether you're paid hourly or receive an annual salary significantly impacts how you calculate and understand your earnings. This calculator helps bridge the gap between these two common pay structures.
Key Differences Between Hourly and Salaried Pay
| Factor | Hourly | Salary |
|---|---|---|
| Pay Basis | Paid per hour worked | Fixed annual amount |
| Overtime | Typically eligible (1.5x pay) | Usually exempt |
| Pay Fluctuation | Varies with hours worked | Consistent pay periods |
| Benefits | May have limited benefits | Often includes full benefits |
How to Convert Between Hourly and Salary
The standard conversion formulas account for full-time employment (40 hours/week, 52 weeks/year):
Hourly to Annual Salary
Hourly Rate × Hours per Week × Weeks per Year
Example: $25/hour × 40 hrs × 52 wks = $52,000/year
Annual Salary to Hourly
Annual Salary ÷ (Hours per Week × Weeks per Year)
Example: $52,000 ÷ (40 hrs × 52 wks) = $25/hour
Considering Overtime in Calculations
For hourly workers, overtime can significantly impact annual earnings. Standard overtime is paid at 1.5 times the regular rate for hours worked beyond 40 in a week.
Overtime Calculation Example
If you earn $20/hour and work 45 hours in a week:
- Regular pay: 40 hrs × $20 = $800
- Overtime pay: 5 hrs × ($20 × 1.5) = $150
- Total weekly pay: $800 + $150 = $950
When to Use Each Pay Structure
Hourly Pay is Better When:
- Work hours vary week-to-week
- Regular overtime opportunities exist
- Job is part-time or seasonal
- You want compensation directly tied to hours worked
Salary Pay is Better When:
- Work requires flexibility in hours
- Job includes significant benefits package
- Position is managerial or professional
- You prefer predictable income