Salary-to-Hourly Calculator

Key terms when using the salary-to-hourly calculator

To use this tool, you’ll need to input the following information. Here’s a breakdown of what each field represents:

• Annual salary: This is the total amount of money you earn in a year before taxes and other deductions. It does not account for overtime pay or bonuses unless they are guaranteed parts of your salary.
• Work hours per week: This refers to the total number of hours you are scheduled to work in a week. The typical full-time work schedule in the United States is 40 hours per week but this can vary depending on the job and the employer.
• Workweeks per year: This is the number of weeks per year you work (typically 52), including any paid time off and holidays you are entitled to as a salaried employee.

What is the difference between hourly and salaried pay?

Hourly and salaried pay are two common methods employers use to compensate employees. In short, hourly employees are paid based on the exact amount of time spent on the job while salaried employees are paid a fixed amount per year, typically based on a 40-hour workweek (excluding any bonuses, commissions or benefits that may be offered).

Hourly pay

Hourly pay is based on the number of hours worked. Employees are paid a set rate for each hour they work and, generally, they receive overtime pay for hours worked beyond the standard full-time hours. Usually, overtime pay is time and a half, or 1.5 times your normal hourly rate.

Unlike salaried employees with a fixed annual income, the total pay for hourly employees can vary significantly each pay period. This variation is due to factors, such as the total hours worked, any overtime accrued and additional stipends or bonuses provided by the employer. The hourly rate usually is agreed upon at the beginning of employment, and employees submit their total hours worked to receive payment at regular intervals, such as weekly or biweekly.

As of 2023, the Fair Labor Standards Act (FLSA) mandates that employers must pay hourly workers at least the federal minimum wage, currently set at $7.25 per hour. Additionally, the FLSA defines overtime as any work done beyond a standard 40-hour workweek, requiring employers to compensate overtime hours at a rate of at least 1.5 times the regular hourly wage. For instance, an employee earning $20 per hour and working 45 hours in a week would receive $950, calculated as $800 for the regular hours and $150 for the overtime hours. Many states have higher minimum wage requirements beyond the federal minimum. 

Hourly wages serve as the base pay and do not typically include other forms of compensation such as health insurance, retirement contributions or bonuses, although these may be offered by some employers.

Salaried pay

Salaried pay is a fixed compensation structure where employees receive a predetermined amount, often expressed as an annual figure, regardless of the number of hours worked. This salary usually is divided into regular payments delivered weekly, biweekly or monthly. For example, an employee with an annual salary of $60,000 might receive 12 monthly payments of $5,000 before taxes. 

Salary ranges for various roles are often determined based on industry standards, such as the nature of the work, required skills, educational level, geographic location and industry demand. 

To qualify as a salaried employee under the FLSA, an individual must be paid a minimum of $684 per week or $35,568 per year. However, as of November 2023, the U.S. Department of Labor is considering raising this threshold to $1,059 per week ($55,068 per year). This classification typically exempts salaried employees from receiving overtime pay.

Salaries are the base rate of pay and do not include other types of compensation such as bonuses, commissions, stipends, reimbursements or benefits like health insurance and retirement contributions. Employers establish salaries to maintain competitiveness and attract talent, taking into account the overall compensation package beyond just the base salary.

What are the pros and cons of being paid hourly?

A company’s human resources department usually determines whether an employee is hourly or salary. Here are a few advantages and disadvantages of hiring an hourly employee.

Pros

• Overtime pay: Hourly workers are often eligible for overtime pay, earning more for hours worked beyond the standard full-time hours.
• Flexibility: Some hourly jobs offer more flexibility in scheduling, which can be beneficial for balancing work with personal life or education.
• Pay reflects hours worked: Your pay directly reflects the time you put in, potentially incentivizing more work hours.
• Transparency in compensation: Hourly pay provides a clear and straightforward understanding of how compensation is earned for the time worked.
• Opportunity for varied work experiences: Hourly work can offer diverse job experiences, especially in roles that cover different projects or tasks.

Cons

• Income fluctuation: Your income may vary based on the number of hours worked, which can make budgeting and financial planning a challenge.
• Fewer benefits: Hourly positions may offer fewer benefits like health insurance or retirement plans compared to salaried positions.
• Less job security: Hourly jobs can sometimes offer less job security, with tentative shifts or cutbacks.
• Limited career growth: Some hourly positions may offer fewer opportunities for career advancement compared to salaried roles.
• Potential for unpaid time off: Unlike salaried positions, hourly workers may not get paid if they need to take time off, which affects income stability.

What are the pros and cons of being paid a salary?

Below are the advantages and disadvantages of hiring a salaried employee. [Learn about exempt employees.]

Pros

• Predictable income: Salaries offer a stable and predictable income, which simplifies budgeting and financial planning.
• Benefits: Salaried positions often come with better benefits, including health insurance, retirement plans and paid time off.
• Professional status: Salaried positions are often recognized as more professional and may come with greater responsibility and opportunities for advancement.
• Career progression: Salaried roles often provide clearer pathways for career advancement and skill development.
• Consistent work schedule: Salaried positions typically offer a more consistent work schedule, which can help in personal planning and stability. [Read more about contract workers vs. employees.]

Cons

• Fixed income: Regardless of the number of hours worked, your pay remains the same, which can be a downside during periods of heavy workload.
• Less overtime pay: Salaried positions usually do not offer overtime pay — any extra hours worked do not translate into extra income.
• Work-life balance: Maintaining a work-life balance can be more challenging as salaried positions often require additional hours or availability outside the typical workday.
• Potential for overworking: There’s a risk of consistently working long hours without additional compensation.
• Less flexibility: Salaried positions may offer less flexibility in terms of hours and scheduling compared to some hourly positions. [Read more about performance-based pay.]

Using our salary-to-hourly calculator can help workers and their employers make informed decisions about their finances and employment arrangements. For employees, it provides a clearer understanding of their true earnings when it comes to the hours they work. 

For employers, this practice aids in accurate budgeting and workforce management, especially when dealing with project-based work or fluctuating workloads. Converting salaries to hourly rates can also enhance compliance with labor laws — especially those governing overtime pay — by ensuring that employees are compensated fairly for all the time they dedicate to their jobs.