Hourly-to-Salary Calculator

Key terms when using the hourly-to-salary calculator

• Hourly wage: Hourly wage refers to the amount of money you earn per hour of work as indicated in your employment contract or pay statement. As of 2023, under the guidelines of the Fair Labor Standards Act (FLSA), employers are required to compensate hourly employees with a minimum wage. The federally established rate is a minimum of $7.25 per hour, although some states have established higher minimum wages. 
• Work hours per week: Work hours per week denotes the total number of hours you are scheduled to work in a week. When calculating your annual salary, you multiply your hourly wage by the number of hours worked weekly.
• Work weeks per year: Work weeks per year indicates the total number of weeks you work in a year, excluding vacation, holidays and any unpaid leave.

What are the advantages and disadvantages of being a salaried employee?

Advantages of being a salaried employee

• Consistent income: One of the most significant advantages of being a salaried employee is the stability of receiving a regular fixed income. Whether you complete your tasks in fewer hours or the standard workweek, your pay remains the same. This predictability is beneficial for monthly budgeting and financial planning.
• Benefits and perks: Salaried positions often come with additional employee benefits that enhance a company’s overall compensation package. These benefits frequently include medical, dental and vision insurance, along with perks like paid time off, which might not be as common in hourly jobs. 
• Career advancement: Salaried positions are commonly perceived as more prestigious, as they are often associated with professional, advanced career paths. These roles usually offer greater opportunities for professional development. The structure of salaried jobs provides a platform for employees to enhance their skills and climb the career ladder.

Disadvantages of being a salaried employee

• Less overtime pay: A notable drawback of salaried employment is the lack of additional compensation for overtime work. While some companies might offer overtime pay, it’s not a standard practice. This can lead to scenarios where working extended hours does not equate to extra pay, which lowers the effective hourly rate, especially during particularly demanding periods. [Read more about the pros and cons of hiring exempt employees.]
• Work-life balance challenges: Salaried positions can sometimes create pressures that affect work-life balance. The expectation to work beyond the standard 40-hour workweek — often without additional compensation — can lead to overexertion and employee burnout. This pressure can stem from office culture or workload demands, thereby impacting an employee’s ability to maintain a healthy balance between work and personal life. 

What are the advantages and disadvantages of being paid hourly?

Advantages of being paid hourly

• Overtime compensation: One of the primary benefits of being paid hourly is the direct correlation between the hours worked and the pay received. Hourly employees benefit from a straightforward system: work more, earn more. This transparent arrangement is particularly advantageous when working overtime. Not only does it provide compensation for extra hours worked — often at a higher rate — but it also incentivizes employees to put in additional effort. Overtime pay is typically 1.5 times the regular rate, making those late nights and weekend shifts significantly more rewarding. Additionally, some companies offer even higher rates for working during holidays or being on call, further enhancing the potential for increased earnings. [Read more about performance-based pay and whether it incentivizes employees.]
• Flexibility: Hourly employment can also offer a level of flexibility that can be particularly appealing. Depending on the setting, employees can adjust their work hours to suit their personal needs and preferences. This flexibility can also extend to how they spread their work across the week; for instance, working longer hours on one day and fewer on another. Moreover, the nature of hourly work opens up possibilities like charging for specific tasks such as phone calls and meetings — activities that are usually part of a salaried employee’s regular hours. This flexibility can also facilitate easier arrangements for remote work, as hourly employees are already accustomed to keeping detailed records of their work, regardless of location.
• Benefits package: Hourly workers who reach full-time status (typically 30 to 40 hours per week) might receive benefits similar to salaried employees. This is especially relevant in larger companies where health coverage laws can apply, making hourly employees eligible for healthcare insurance if they maintain a certain number of weekly hours. In this scenario, the accrual of vacation and sick days often corresponds with the number of hours worked, allowing hourly workers to earn these benefits in proportion to their labor. For contractors, the ability to negotiate higher hourly rates to compensate for the absence of traditional benefits can be a substantial advantage.

Disadvantages of being paid hourly

• Income variability: One of the main disadvantages of being paid hourly is the inconsistency in income. Hourly employees’ earnings are directly tied to the number of hours they work, which can vary significantly from week to week. This variability can make budgeting and financial planning challenging, as there is no guaranteed fixed income. While overtime work can supplement income, the base hourly wage may not always compensate for this lack of stability. Furthermore, hourly employees often earn less than their salaried counterparts, unless they consistently work overtime. However, even an hourly employee’s overtime rate — typically 1.5 times the regular hourly wage — may not match the earnings of a salaried employee.
• Fewer benefits: Hourly positions generally come with a more limited benefits package compared to salaried roles. This can include higher required contributions towards health insurance premiums and possibly lower-quality healthcare plans with more restrictions. Vacation offerings for hourly workers also tend to be more limited, both in terms of duration and flexibility. The reduced benefits package not only affects the overall compensation but can also impact the employees’ perception of their value within the company. 
• Reduced job security: Hourly employees may also experience less job security. Especially in states with right-to-work laws, hourly workers do not have employment contracts, making their jobs more precarious. They can be dismissed without cause and can likewise leave without notice, which can impact the stability of both the employee and the employer. Furthermore, during slow periods or company downturns, hourly employees may suffer from reduced hours, directly impacting their income. While this approach saves the company money by not paying for hours not worked, it risks losing talented employees to competitors offering more stable hours or better benefits.

By understanding how your hourly wage translates to an annual salary, you may put yourself in a better position to negotiate your pay with your current employer. Alternatively, if you’re thinking about switching to a salaried job, knowing the equivalent annual pay you’re earning as an hourly employee can help you narrow down your options and ensure you don’t settle for a pay cut.