Key takeaways
- To compare offers, convert both to the same unit. $25.00 an hour at 40 hours a week is $52,000 a year.
- A salary’s real hourly rate depends on the hours you actually work. $55,000 at 50 hours a week is only $21.15 an hour.
- Hourly and non-exempt workers earn time-and-a-half after 40 hours a week. Most salaried “exempt” workers don’t.
- Paid time off and benefits often matter as much as the base number. Put a dollar value on them before deciding.
A salary looks like a big, stable number. An hourly wage looks small. Comparing them fairly means converting to the same unit, and then accounting for everything that isn’t in the headline number: overtime, hours, time off, and benefits.
Converting between hourly and salary
The standard full-time year is 40 hours × 52 weeks = 2,080 hours.
- Hourly to annual: hourly rate × hours per week × weeks per year. $25.00 × 40 × 52 = $52,000.
- Annual to hourly: salary ÷ (hours per week × weeks per year). $55,000 ÷ 2,080 = $26.44 an hour.
- Mental shortcut: double the hourly rate and add “000.” $25 an hour ≈ $50,000 a year, a slight underestimate.
That conversion assumes you’re paid for all 52 weeks. If an hourly job doesn’t pay for holidays or vacation, subtract the unpaid weeks. At 50 paid weeks, $25.00 an hour is $50,000, not $52,000.
The hours question: your real hourly rate
A salary is fixed no matter how many hours you work (for exempt employees). If a salaried job regularly runs past 40 hours, your effective hourly pay drops:
| $55,000 salary, hours per week | Effective hourly rate |
|---|---|
| 40 | $26.44 |
| 45 | $23.50 |
| 50 | $21.15 |
Compare that with an hourly job at $25.00: 40 hours a week earns $52,000. If the hourly job regularly adds 5 hours of overtime at time-and-a-half, it pays $61,750 a year, more than the $55,000 salary for similar hours.
Ask about typical hours before accepting a salaried role, especially if you’re moving from hourly work where every extra hour was paid.
Overtime: exempt vs. non-exempt
Under the federal Fair Labor Standards Act (FLSA), non-exempt employees must be paid at least 1.5 times their regular rate for hours over 40 in a workweek. That covers nearly all hourly workers, and some salaried ones.
Salaried employees are exempt from overtime only if all three are true:
- They’re paid a fixed salary that doesn’t drop based on hours or quality of work (the salary-basis test).
- The salary is at least the federal minimum salary level set by the Department of Labor, or a higher state level.
- Their main duties are genuinely executive, administrative, professional, computer, or outside sales work (the duties test).
Job titles don’t decide exemption. Duties and pay do. Some states, such as California, have stricter rules, including higher salary thresholds and daily overtime. The Department of Labor’s Wage and Hour Division has the details.
What else changes when you switch
| Typically hourly | Typically salaried | |
|---|---|---|
| Pay stability | Varies with hours scheduled | Same every pay period |
| Extra hours | Paid, often at 1.5× | Usually unpaid if exempt |
| Paid time off and holidays | Varies; sometimes unpaid | More commonly included |
| Benefits eligibility | May depend on hours worked | Usually full-time benefits |
| Schedule control | Clock-based | Results-based, often more flexible |
Put a price on benefits
Benefits can be worth thousands of dollars a year. Across private industry, employer spending on benefits averages close to 30% of total compensation, according to the Bureau of Labor Statistics. When comparing offers, estimate the dollar value of:
- Health insurance: the employer’s share of premiums and what you’d pay out of pocket.
- Retirement match: a 50% match up to 6% of a $55,000 salary is worth $1,650 a year. See the 401(k) match.
- Paid time off: each paid week is worth about 1/52 of annual pay.
- Other perks: bonuses, tuition help, commuter benefits, remote work that saves commuting costs.
Taxes work the same either way
Salaried and hourly wages are taxed identically: the same federal brackets, the same Social Security and Medicare taxes, and the same state taxes. Your take-home pay depends on your total pay, pre-tax deductions, and W-4, not on whether it’s calculated hourly. Irregular hourly paychecks can make withholding bounce around, though. See how the W-4 works.
The salary to hourly calculator converts between hourly, weekly, biweekly, monthly, and annual pay, including overtime and unpaid weeks. The paycheck calculator shows take-home pay after taxes for either pay type.