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How to Convert an Annual Salary to an Hourly Wage



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It's easy! To convert your annual salary into an hourly wage, just divide the salary by the number of hours worked in a year. Working for 40 hours a week, for example, comes out to 2080 hours over 52 weeks. It's that simple. With a salary of $40,000 a year, your calculation would look like this.

$40,000/2080 = $19.23/hour

Now here's a handy trick that makes it even easier. If there were only 50 weeks in a year, that equation would involve a nice, round number, since fifty 40-hour work weeks contain exactly 2,000 hours. Mathematically, this means that simply dividing the annual salary by 2,000 will approximate the hourly rate within four percent! These two equations show how close the results would be for a salary of $40,000 a year.

$40,000/2000 hours = $20/hour (approximately)

$40,000/2080 = $19.23/hour (exactly)

An even easier trick is to simply divide the number of thousands in the salary by two. This makes it easy to determine that a salary of $40,000 a year is approximately $20 an hour!

$40,000/2000 = $40/2 = $20/hour (approximately)

It's a little trickier if the work week isn't 40 hours, but the ultimate goal is still calculating the "dollars per hour." Since the salary represents the total dollars per hour, just divide it by the total hours worked in the year. For example, earning $40,000 a year working 35 hours a week would be 40,000 / (35 * 52) , or $21.98 per hour.

There's one very important caveat. Many hourly workers don't receive health insurance benefits like the employees who earn salaries. So the per-hour calculation only tells part of the story. (After all, take-home pay is irrelevant if it's just going to turn into leave-home-and-go-to-your-doctor pay!) On the other hand, federal law requires that most hourly workers be paid "time and a half" if they work more than 40 hours in a week. (That is, they receive 1.5 times their hourly wage for the 41st hour, and every hour thereafter.)

Another factor can slightly change this calculation: the tax bracket. In America, most income above $31,851 a year was taxed at a 28% rate in 2007 (versus a 25% rate for income between $7,826 and $31,850.) It's possible that an increase in the hourly wage will lead to the new income being taxed at a higher rate, slightly reducing the actual size of the increase.

Hourly paychecks can result in another interesting anomaly. Since some months contain more days than others, they also contain more hours. (February, for example, has exactly four weeks, or 160 hours, but in leap year, it has 168 hours!) And there's four months each year which contain five Fridays, which can seem like an extra paycheck. (Employees who are only paid once every two week will still enjoy this "extra" paycheck, but only twice a year). But regardless of all these anomalies, the actual hourly rate never changes.

It's nice to know that with all the other variables affecting paycheck size, there's at least one number staying constant!

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