How to Calculate Your Hourly Rate from Salary

What an hourly rate is

Your hourly rate is what your salary is worth for every hour you work — the number a job offer really turns on. Two offers with the same salary can be worth very different amounts an hour, once the hours and the weeks are counted. On the defaults here — a $75,000.00 salary at 40 hours a week, 52 weeks a year — the hourly rate is $36.06. Every figure here is checked against the salary calculator.

The hourly-rate formula

Hourly rate = annual salary ÷ (hours per week × weeks per year). Weekly pay is the salary divided by the weeks per year; biweekly pay is the salary divided by 26; monthly pay is the salary divided by 12; daily pay is the weekly pay divided by 5, a five-day week. The tax is the salary times your effective tax rate, and the take-home pay is the salary times one minus the rate.

Step 1: Divide your salary by the hours you work

Divide your salary by the hours you work in a year. Hours in a year are your hours per week times your weeks per year: 40 × 52 = 2,080 hours on the defaults. So $75,000.00 ÷ 2,080 = $36.06 an hour (36.0577 exact). The hours are the lever: the same salary at 35 hours a week is $41.21 an hour, because the pay is spread over fewer hours.

Step 2: Work out the other pay periods from the same salary

Work out the other pay periods from the same salary, so you can compare offers paid on different schedules. On the defaults the weekly pay is $75,000.00 ÷ 52 = $1,442.31; the biweekly pay is $75,000.00 ÷ 26 = $2,884.62; the monthly pay is $75,000.00 ÷ 12 = $6,250.00; and the daily pay is $1,442.31 ÷ 5 = $288.46.

Step 3: Apply your effective tax rate for the take-home rate

Apply your effective tax rate for the take-home rate. At 22% the tax is $75,000.00 × 22% = $16,500.00, so the take-home pay is $58,500.00 a year — $4,875.00 a month, and $28.13 an hour after tax. The rate here is an effective rate, all taxes combined as one percentage: a real paycheck withholds in brackets, plus Social Security and Medicare, so treat the take-home as an estimate.

Step 4: Add overtime at time-and-a-half

Add overtime at time-and-a-half. The overtime rate is the hourly rate times 1.5: $36.06 × 1.5 = $54.09 an hour on the defaults. So 5 overtime hours a week pay $270.43 a week and $14,062.50 a year on top of the salary.

Step 5: Reverse it when you need a target

Reverse it when you need a target. To earn $50.00 an hour at 40 hours a week, 52 weeks a year, the salary must be $50.00 × 2,080 = $104,000.00. To take home $5,000.00 a month after 22% tax, the salary must be $76,923.08. And the first salary that clears $70,000.00 of take-home is $89,744.00: at $89,744.00 the take-home is $70,000.32, while $89,743.00 gives $69,999.54.

Step 6: Watch the traps

Watch the traps. Fewer weeks change the rate: 48 weeks a year makes the same $75,000.00 worth $39.06 an hour and $1,562.50 a week, because the pay is spread over fewer weeks. A 35-hour week makes the same pay worth $41.21 an hour — fewer hours, same pay, higher rate. And an effective tax rate is not a marginal bracket: the effective rate is the average across all your income, while the marginal bracket is the rate on the next dollar.

Worked example

Put the six steps together for a $75,000.00 salary at 40 hours a week, 52 weeks a year, with a 22% effective tax rate. The hourly rate is $36.06 (36.0577 exact); the weekly pay is $1,442.31; the biweekly pay is $2,884.62; the monthly pay is $6,250.00; the daily pay is $288.46; the tax is $16,500.00; the take-home pay is $58,500.00 a year, $4,875.00 a month; the after-tax hourly rate is $28.13; the overtime rate is $54.09 an hour. A $100,000.00 salary on the same hours is $48.08 an hour and $78,000.00 take-home, and $89,744.00 is the first salary that clears $70,000.00 of take-home. Totals use unrounded values, so rounded parts may differ by a cent.

How the numbers change

A $50,000.00 salary is $24.04 an hour and $39,000.00 take-home. At a 12% tax rate the same $75,000.00 leaves $66,000.00 take-home, $5,500.00 a month. At 60 hours a week the same salary is $24.04 an hour. And a $120,000.00 salary at a 32% tax rate is $57.69 an hour and $81,600.00 take-home, but the higher rate takes $38,400.00 of it.

Working backwards

It also runs in reverse. To earn $40.00 an hour on $75,000.00 takes 36.06 hours a week: 36.05 hours gives $40.01, and 36.07 gives $39.99. To clear $300.00 a week of overtime pay takes 5.55 overtime hours a week: at 5.55 hours the overtime pay is $300.18, 18¢ over the $300 target, because the exact figure is 5.5467 hours. A $0 salary is $0.00 an hour, and a $1,000,000.00 salary is $480.77 an hour and $780,000.00 take-home.

What the calculation leaves out

Four things are left out. First, the tax is one effective rate, while a real paycheck withholds federal and state tax in brackets, plus Social Security and Medicare, and subtracts pre-tax deductions like a 401(k) or health insurance. Second, bonuses, commissions, and tips are taxed differently and are not in the model. Third, state taxes vary by state. Fourth, the overtime rules beyond time-and-a-half — double time, holiday pay, and the federal overtime threshold — are not in the model. For the take-home pay in detail, see the how to calculate take-home pay guide, and for overtime, the how to calculate overtime pay guide.

What to do next

Run your own numbers through the salary calculator — and if the offer comes with a different number of weeks, check what the hours do to the rate before you sign.