Hourly Wage Calculator

Key Terms When Using the Hourly Wage Calculator

To use this tool, you will need to enter the following information. Here is a breakdown of what each field represents:

• Annual salary: This is the total amount you earn in a year before taxes and other deductions. It does not take into account overtime or bonuses unless they are a guaranteed part of your salary.
• Working hours per week: This is the total number of hours you are expected 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 employer.
• Working weeks per year: This is the number of weeks per year you work (usually 52), including paid vacation and vacation time you are entitled to as a salaried employee.

What is the difference between hourly wage and salaried wage?

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

Hourly wage

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

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

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

Hourly pay serves as a base salary and generally does not include other forms of compensation such as health insurance, retirement contributions, or bonuses, although these may be offered by some employers.

Salaried salary

Salary compensation is a fixed compensation structure in which employees receive a predetermined amount, often expressed as an annual figure, regardless of the number of hours worked. This salary is usually divided into regular payments paid weekly, biweekly or monthly. For example, an employee with an annual salary of $60,000 could 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, education level, geographic location, and industry demand.

To be considered a salaried employee under the FLSA, an individual must receive a minimum of $684 per week or $35,568 per year. However, since November 2023, the U.S. Department of Labor plans to raise this threshold at $1,059 per week ($55,068 per year). This classification generally exempts employees from overtime pay.

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

What are the advantages and disadvantages of being paid hourly?

A company’s human resources department typically determines whether an employee is paid hourly or salary. Here are some pros and cons of hiring an hourly employee.

Benefits

• Overtime pay: Hourly workers are often entitled to overtime pay, earning more for hours worked beyond normal full-time hours.
• Flexibility: Some hourly jobs offer more flexibility in terms of schedules, which can be beneficial for balancing work with home life or school.
• Remuneration reflects hours worked: Your salary directly reflects the time you put in, which can potentially incentivize you to work more.
• Transparency in remuneration: Hourly remuneration makes it possible to understand clearly and simply how remuneration for time worked is paid.
• Possibility of varied work experiences: Hourly work can offer a variety of work experiences, especially in roles that span different projects or tasks.

Disadvantages

• Income fluctuation: Your income may vary depending on the number of hours you work, which can make budgeting and financial planning difficult.
• Less advantages: Hourly positions may offer fewer benefits like health insurance or retirement plans than salaried positions.
• Less job security: Hourly jobs can sometimes offer less job security, with temporary changes or reductions.
• Limited career development: Some hourly positions may offer fewer career advancement opportunities than salaried positions.
• Possibility of unpaid leave: Unlike salaried positions, hourly workers may not get paid if they have to take time off, affecting income stability.

What are the advantages and disadvantages of being paid?

Here are the pros and cons of hiring an employee. (Learn more about exempt employees.)

Benefits

• Predictable income: Salaries provide stable, predictable income, making budgeting and financial planning simpler.
• 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 responsibilities and opportunities for advancement.
• Career development: Salaried positions often offer clearer pathways for career advancement and skills development.
• Consistent work schedule: Salaried positions generally offer a more consistent work schedule, which can facilitate personal planning and stability. (Learn more about contract workers vs employees.)

Disadvantages

• Fixed income: Regardless of the number of hours worked, your salary remains the same, which can be a disadvantage during periods of heavy workload.
• Less overtime pay: Salaried positions generally do not offer overtime pay: additional hours worked do not translate into additional income.
• Work-life balance: Maintaining a work-life balance can be more difficult, as salaried positions often require overtime or availability outside of the typical workday.
• Potential for overwork: There is a risk of consistently working long hours without additional pay.
• Less flexibility: Salaried positions may offer less flexibility in terms of hours and schedules compared to some hourly positions. (Learn more about performance-based compensation.)

Using our hourly wage calculator can help workers and their employers make informed decisions about their finances and employment conditions. For employees, this provides a better understanding of their true earnings in terms of hours worked.

For employers, this practice facilitates accurate budgeting and workforce management, especially when dealing with project-based work or fluctuating workloads. Converting wages to hourly rates can also improve compliance with labor laws – particularly those governing overtime pay – by ensuring that employees are compensated fairly for all the time they spend on their jobs.