Divide by 2,080 and you have the answer everyone quotes. It is right only for someone who works exactly forty hours a week for all fifty-two and never takes a day off, which is nobody. This salary to hourly calculator gives you both figures: the shortcut, and what an hour of your time is actually worth.
You work fewer hours than you are paid for
A salary buys your year, holidays included. Ten vacation days and eleven public holidays is twenty-one days you are paid for and do not work, which on a forty hour week leaves 1,912 hours rather than 2,080.
So a $65,000 salary is $31.25 an hour by the shortcut and $34.00 against the hours you actually turn up for. Those twenty-one days are worth $5,250, and they are part of your compensation whether or not anybody ever describes them that way.
This is the opposite of what most people expect. Paid time off pushes your effective hourly rate up, not down, because you are paid the same for fewer hours worked. The more generous your package, the further apart the two numbers get.
Which figure to use, and when
The two numbers answer different questions, and using the wrong one leads you somewhere wrong.
- Comparing against an hourly job offer? Use the effective rate. The hourly job probably pays nothing for those twenty-one days, so the straight rate flatters it.
- Working out what an extra hour costs you, or what a side project is worth? Use the straight rate. Your salary does not change either way, so the hours you already work are the honest denominator.
- Quoting freelance work? Neither, on its own. Start from the effective rate and add for the benefits, unpaid gaps and employer taxes you would be covering yourself.
Long hours change the answer fast
The calculation is unforgiving about hours, and that is the point. A salary is a fixed number divided by however long you are actually there, so every extra hour lowers what each one is worth.
On $65,000, a fifty hour week rather than forty drops your effective rate by roughly a fifth. Enter your real hours rather than your contracted ones and the figure becomes genuinely useful, particularly if you are weighing a promotion that comes with longer days.
Going the other way
If you have an hourly rate and want the annual figure, the hourly to salary calculator runs the same relationship in reverse, where unpaid time works against you rather than for you.
Salary to hourly calculator FAQ
$31.25 an hour by the standard 2,080 hour shortcut. Counting ten vacation days and eleven holidays, you actually work 1,912 hours, making your effective rate $34.00 an hour. Both figures are correct; they answer different questions.
Divide your annual salary by the hours you are paid for, normally 2,080 for a full-time year. For what your time is really worth, divide instead by the hours you actually work, which is 2,080 minus your paid days off multiplied by your daily hours.
Your daily rate multiplied by your paid days. On $65,000 with twenty-one paid days off, that is about $5,250 a year, which is real compensation even though it never appears as a line on your pay stub.
Use 2,080 when working out what an extra hour costs you, since your salary does not change. Use your actual hours when comparing against an hourly job or pricing freelance work, because that is what your time is genuinely worth.