If you are paid on salary, an estimate of your hourly wage might be handy when assessing the scope of a potential project or calculating the value of your labor. This information is especially relevant during tax season, when many people are looking to do their taxes as efficiently (and with as much return) as possible.
Additionally, business owners and project leaders may find this information useful in determining a budget for a specific project or development in order to find the best suited worker for the job.
If you don’t consider yourself a mathematician, it may be difficult to know how to properly convert your salary to hourly, especially if you’re not used to thinking about your wages in that way. But you don’t have to be an eagle-eyed accountant to easily convert between annual and hourly pay!
This article will serve as an all-purpose guide to calculating your hourly wage from your salary–whether you’re paid weekly, biweekly, monthly, or even yearly. We’ll also be sharing time-management tools and techniques to boost your efficiency and organizational skills.
Types of Work Compensation
There are two main types of general compensation: direct and indirect. Direct circumstances includes salary, hourly, contract, and commission. While salary and hourly pay are most common, the truth is that the digital era has revolutionized remote and hybrid work, leading to an increase in varying types of compensation.
Hourly: Your hourly wage is the set rate you make per hour. If you work overtime (more than 40 hours in a week), you often get paid one-and-a-half times your regular hourly rate. For example, if you make $15 per hour, you would make $22.50 per hour for overtime.
Salary: Your salary is the amount you make annually (per year), divided by the number of pay periods in a year.
The main difference between hourly and salary pay is how your pay is determined. With hourly pay, your pay is based on the number of hours you work. With salary pay, your pay is based on an annual salary.
While these types of income make up the largest percentage of the workforce, employees generate income in other convertible ways.
Commission: An employee working on commission means that they are paid a percentage of the sales that they make. This can be seen as an incentive for salespeople to sell more products. The percentage can be a set amount or it can be based on the number of products sold.
Contract: Contracts are usually drafted based on a set hourly wage, but only for a set number of hours. Alternatively, contracts can specify a set fee for the completion of an entire project.
Benefits: The benefits and perks that workers receive upon working at a company are an example of indirect compensation. Depending on what benefits your company offers, you may also receive additional amenities.
This can include health insurance, dental insurance, life insurance, vacation and sick leave, and more depending on the employer. These benefits are typically a percentage of your salary, so you may also need to calculate what percentage of your salary these benefits represent.
While perks and benefits aren’t considered wages, they contribute to a workers overall earnings, morale, and work-ethic making them a crucial factor to consider.
It’s up to you to determine how much weight you attribute to job benefits, as this depends on the reason for finding your hourly wage.
Calculating Hourly Wage
If you’re paid hourly, this step is easy: simply multiply your hourly wage by the number of hours you work in a week. If you’re paid a salary, you’ll need to convert your salary to an annual salary.
Here are the steps made simple:
- Determine your salary period. This is the time frame over which you are paid your salary. For example, you may be paid a salary every 2 weeks, every month, or every year.
- Convert your salary period to weeks. If you’re paid every 2 weeks, multiply your salary by 2. If you’re paid monthly, multiply your salary by 12 and divide by 52. If you’re paid yearly, divide your salary by 52.
- Determine the number of hours in your salary period. This will depend on your work schedule. For example, if you work 40 hours per week, you would have 160 hours in a 4-week period.
- Divide your annual salary by the number of hours in your salary period. This will give you your hourly wage.
Once again, there are other factors not included when converting salary to hourly, including benefits, bonuses, and PTO. The first step is to understand how many hours you work in a year. The standard calculation is to take the number of hours you work in a week and multiply it by 52. This gives you the number of hours you work in a year.
Method 2: Determine Your Hourly Rate The next step is to determine your hourly rate. To do this, divide your annual salary by the number of hours you work in a year.
Here’s the formula: Hourly rate = Annual salary ÷ Hours worked per year For example, if your annual salary is $50,000 and you work 2,080 hours per year, your hourly rate is $24.04.
Method 3: Determine Your Hourly Rate (alternative method) If you’re paid hourly, you can also use your pay stubs to calculate your hourly rate.
Look at your pay stub and find your gross pay. This is the amount of money you make before taxes.
The main advantage of hourly pay is that it’s easier to budget for. You know exactly how much you’ll have coming in every week, which makes it easier to save for upcoming expenses. On the other hand, hourly pay can be a disadvantage if you’re unable to find consistent work or if you’re trying to stick to a budget.
If you are working under a contract or fixed fee, you may want to consider negotiating for an hourly rate. This will give you a higher level of flexibility and allow you to be paid for the time you actually work, rather than for a set number of hours or tasks.
Easy Time Tracking
One way to keep up with your hours is by using a scheduling software. There are many time-tracking software programs available, both free and paid. Scheduling software tracks the time you spend on your computer and gives you reports and insights about your productivity
For business leaders, time-tracking software allows team insights that may never have been possible before, so that you can delegate tasks and assignments without worrying whether or not they’ll be completed by the given deadline. Time-tracking also allows you to see which tasks are taking up the most time, so you can optimize your workflow.
Many software allow team messaging as well, making these software a comprehensive base for project management and insights.
Another way to keep up with your hours is by using a time sheet. A time sheet is a piece of paper or an electronic document on which you record the time you spend working on each task. Time sheets can help you see how you are spending your time and can be used to bill clients or track project progress.
This software also allows you to keep up with bonuses and benefits, including PTO. The software is connected to payroll, so all the heavy lifting is done by us.
In addition, Day’s digital nature makes it eco-friendly in terms of paper cost and more efficient than a traditional time sheet by ease of access.
Time Management Techniques
Time management is one of the most critical components of business success. There are a wide variety of different time-management techniques out there, but these are some of the most popular and effective ones:
The Eisenhower Matrix, or The ABC Method: This technique involves categorizing your tasks as A (urgent and important), B (important but not urgent), or C (neither urgent nor important). You then prioritize tasks in each category accordingly.
The Pomodoro Technique: This technique involves working in short, 25-minute bursts followed by 5-minute breaks. After 4 Pomodoros (i.e. 4 blocks of 25 minutes), you take a longer break, usually 20–30 minutes.
The 80/20 rule: This rule states that 80% of your results come from 20% of your efforts. In other words, you should focus on the activities that are giving you the most results, and cut back on the ones that aren’t. While not all on-site positions offer this flexibility
How to convert salary to hourly: Final Thoughts
Thanks to powerful engineering capability, a previously tedious and time-consuming process has been simplified and can even be automated. With all of these features, time-tracking will become an even more valuable tool for both individuals and businesses.
In the future, time-tracking technology will become even more sophisticated. For instance, time-tracking software will be able to analyze how you spend your time and send you reminders to stay on track. With all of these features, time-tracking will become an even more valuable tool for both individuals and businesses alike.