January 5, 2023 |6 min read
When you start a new job, it’s usually already decided whether you’ll be paid on an hourly or salary basis. But if you’re a salaried employee, you may want to know how your paycheck translates into an hourly rate—for instance, if you’re exploring other jobs that pay by the hour.
Learn how to do the calculation—it only takes three steps—and about some of the differences between hourly and salaried wages.
Key takeaways
- Although employees don’t usually have a choice in whether they’re paid yearly or hourly, it can help to know how to convert a salary to an hourly rate.
- Knowing your hourly rate can help with budgeting, comparing jobs and setting hourly rates for freelance work.
- It only takes a few steps to calculate an hourly rate from a salary.
Calculating hourly rate from salary in 3 steps
Calculating your hourly pay rate only takes a few steps, which are detailed below. But keep in mind that you might be able to find some of this information—like your gross pay and number of hours worked—on your pay stub. It might even show you a breakdown of your yearly salary into an hourly rate.
If not, you can find all the information you need to calculate your hourly rate in a few steps.
But first, if you consistently work 40 hours a week, there’s a quick and easy way to calculate your hourly rate in just one step: divide your annual salary by 2,080.
If you work a different number of hours each week, you can calculate your hourly rate like this:
- Calculate pay per week. Start by figuring out your gross pay, which is the amount you earn before taxes and other deductions. You can do this by dividing your annual gross salary by 52, the number of weeks in a year. This will give you an estimate of your weekly salary.
- Determine the number of hours worked per week. You can get a general idea of your hourly rate by averaging the number of weekly hours you work over a certain period of time, like a month or two.
- Divide weekly pay by hours worked. Divide your weekly salary by the number of hours you work per week—or the average hours worked per week. This should give you your hourly pay rate.
For example, an employee earning $40,000 annually who works 40 hours per week would determine their hourly rate like this:
$40,000 per year ÷ 52 weeks in a year = $769.23 per week
$769.23 weekly wages ÷ 40 hours per week = $19.23 per hour
Salary vs. hourly pay
One of the biggest differences between salaried and hourly employees is overtime pay, or OT as it’s called for short.
OT is the extra pay a person receives after working more than 40 hours per week. And the typical rate is one and a half times a worker’s normal rate. For example, a person earning $20 an hour would be paid $30 per hour for the 41st hour they work and beyond.
Ultimately, OT rules come down to employee classifications under the Fair Labor Standards Act (FLSA), the law that also covers minimum wage standards. FLSA standards can get complicated. And there are all kinds of exceptions. But in general, hourly workers are more likely than salaried workers to be eligible for OT pay.
If you’re comparing salaried jobs and hourly jobs or trying to negotiate pay, do research or ask a potential employer how it handles OT. It might also be worth figuring out:
- Typical work hours and expectations
- Whether schedules are guaranteed or could fluctuate, especially for hourly positions
- Health care benefits and eligibility
- Fringe benefits, including time off and retirement plans
Salary to hourly calculations in a nutshell
Converting your salary to an hourly rate can give you an idea of how much you might be earning per hour. Knowing this can help you budget or compare jobs.
Now that you know how to calculate your hourly rate from your salary, you can use this information when searching for a job.
