Hourly to Salary: A Guide to Converting Pay Types

Key takeaways

An hourly wage is what you earn for each hour worked, while a salary is a set amount you are paid annually, divided into monthly or weekly amounts.

• Hourly contracts are standard in the US, with 55.7 percent of all workers in 2023 paid hourly [1].

• When considering compensation offers, factor in differences between hourly wages and annual salaries, including overtime eligibility, employer benefits, and job security.

• You can use an hourly-to-salary calculator to convert salary to hourly or vice versa to help determine which method of compensation is most beneficial in your situation.

Find out more about each payment method, popular tools for conversion between the two, and the pros and cons of each. To build a foundation of basic compensation terms, regulations, and concepts needed to support strategy design and administration, enroll in the ADP Entry-Level Compensation and Benefits Analyst Professional Certificate. In as little as two months, you can build job-ready skills in payroll, regulatory compliance, data analysis, and compensation strategy, among others. 

Hourly to salary: What's the difference? 

An hourly wage and a salary are two different ways an employer pays you. If you receive hourly pay, you'll be paid at a set rate for each hour you work. Getting paid hourly means your hours may vary weekly, earning a variable amount and potentially working overtime. Employers must comply with minimum wage laws. These vary from state to state, but the national minimum wage in the US is $7.25 per hour [2]. 

A salary is a fixed income calculated based on a set number of hours worked over a year, divided into monthly or weekly payments. Your experience level, education, industry, and time in service generally determine your salary. 

Hourly to salary calculator options

As you consider your compensation offers, you can compare earnings over time using an hourly-to-salary converter. Consider using a conversion tool to see the equivalent hourly rate of your salary or the salary equivalent of your hourly rate. Some options include the following:

• Indeed Hourly to Salary Calculator 

• Omni Calculator Salary to Hourly Calculator

• CalcXML Hourly Wage to Annual Salary Calculator

• ADP Hourly Paycheck Calculator

• Talent.com Annual/Monthly/Weekly/Hourly Converter

Finally, it’s important to remember that while a converter will provide a direct earning comparison, you may want to factor in other differences between hourly wages and annual salaries, including overtime eligibility, employer benefits, and job security, when evaluating compensation offers.

How to calculate hourly rate from salary

To calculate the amount of money you make per hour based on your annual salary, follow these two steps:

1. Multiply the hours you work per week by the number of weeks in a year (52) to determine the total number of hours you worked over the course of the year.

2. Divide your annual salary by this number. 

For example, if you earn $100,000 per year and work 40 hours per week, your hourly rate is:

100,000 / (40 X 52) = $48.08

Hourly wage

An hourly wage is the amount of money you make per hour of work. To determine your projected or owed pay, multiply the hours worked by your hourly rate. It is common in temporary, minimum-wage, and freelance jobs. 

Hourly contracts are standard in the US. According to the most recent data from the US Bureau of Labor Statistics (BLS), 55.7 percent of all workers were paid hourly in 2023 [1].

Pros of an hourly wage

If you’re deciding whether to accept an hourly wage or negotiate a salaried position, you should carefully consider the advantages and disadvantages that make this payment structure unique. Working on an hourly wage contract provides several benefits, making it an attractive option for many workers.

Some of the pros include:

• Paid for every hour worked: When you work based on an hourly wage payment structure, your employer pays you for your time without an expectation to work unpaid overtime. 

• Option to work overtime: Your employer must pay you overtime if you work more than 40 hours a week or during the holidays. Legal guidelines require this figure to be 1.5 times your standard hourly wage unless otherwise stated in your contract [3]. In some cases, your employer may even pay double.

• Work–life balance: Working at an hourly rate means you have a specific work period, and generally, your employer doesn’t expect you to work late. In some cases, you can pick your shifts or decide how much you work per week. This flexibility allows you to build your schedule to allow time for personal pursuits.

Read more: Work-life Balance: What It Is and 5 Ways to Improve Yours

Cons of an hourly wage

Along with many benefits, you’ll also find a few downsides of hourly pay compared to its salary counterpart. A few drawbacks of working for an hourly wage include the following:

• Less job security: If your employer needs to reduce employee hours, or worse, to let staff go, someone in an hourly rate role has less security than someone on an annual salary. In many cases, employers choose to make reductions to hourly schedules rather than let salaried employees go. 

• Lost pay for missed hours: If you work hourly and need to take time off for an appointment or event, you’ll likely lose the income for that period. Generally, you don’t get paid if you don’t work. In contrast, salaried employees generally have paid personal hours they can use for appointments or sick days.

• No health insurance: Depending on your contract, workers on an hourly rate often have to cover their own health insurance costs. Regulations generally don’t require employers to offer health insurance to employees working under 30 hours per week. If the company has under 50 employees, employers may not be required to provide hourly workers with health insurance.

Annual salary

Being paid an annual salary means you receive a predetermined yearly payment divided into monthly or weekly amounts, which employers can prorate for part-time positions. Annual salaries typically accompany permanent positions, full-time jobs, and roles seen as career options. These roles generally come with more responsibilities than an hourly position. 

Pros of a salary

A salaried role has many benefits, including job security, health insurance, and bonuses. You might choose a salaried position for advantages like the following:

• Consistent payments: A job with an annual salary means you know exactly what your employer pays you each month, regardless of your hours. This amount generally includes paid personal time for vacations, appointments, and sick days.

• Career advancement opportunities: People in salaried jobs are usually on a pay scale with room for promotion based on experience and time within a company. Typically, salaried positions include more responsibilities, and employees in these positions may be offered promotions before their hourly counterparts. 

• More comprehensive benefits: Workers on an annual salary tend to have better benefits included in their contracts, such as health care, flexible work hours, paid vacation, and retirement investments. Salaried employees also have more job security than hourly employees, as hourly employees are usually the first to be let go or have their hours reduced.

Cons of a salary

While salaried jobs have various benefits, these roles can also have some cons to consider. To decide which is right for you, consider what you value most in your position and what you’re willing to overlook. Some disadvantages of a salaried position compared to hourly pay include:

• No overtime: Unlike hourly wage employees, who receive compensation for extra hours, employers may expect salaried employees to work above their hours to finish a project, often without additional pay. In some cases, hourly employees can make more than salaried employees for the actual hours worked, especially when factoring in overtime or holiday pay.

• Work–life balance: Depending on your organization and industry, you may have rigid requirements for your office hours. Having a set schedule without the capacity to reduce hours can make it challenging to balance personal commitments or adjust your schedule around other lifestyle factors.

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