Salary calculator

Comparing an hourly rate against a salary means putting both on the same footing — which requires deciding how many hours a year you actually work.

The 2,080-hour convention

Forty hours a week for 52 weeks gives 2,080 hours, which is the standard divisor for converting a US salary to an hourly figure. A $70,000 salary is $33.65 an hour on that basis. The convention includes paid holiday and vacation, on the reasoning that a salaried employee is paid for those weeks.

For a contractor without paid leave, the honest divisor is lower. Taking four weeks off unpaid leaves 1,920 hours, and the same $70,000 requires $36.46 an hour to match.

Why contract rates have to be higher

An employee's salary is only part of what the role costs. To match a $70,000 job, a self-employed contractor typically needs 25-40% more, covering:

Unpaid time off — holiday, sick days and public holidays are unbilled.
Self-employment tax — in the US, the full 15.3% rather than the employee half.
Health insurance and pension, unsubsidised.
Unbillable hours — invoicing, sales, admin. Most independents bill 60-75% of their working time.
Gaps between contracts, which are the risk premium of the arrangement.

Monthly is not four weeks

A month averages 4.33 weeks, so monthly pay is the annual figure divided by 12, not weekly pay times four. Multiplying by four understates monthly income by about 7.7%.

This also explains a payroll quirk: employees paid every two weeks receive 26 payments a year, so two months out of twelve contain three paychecks rather than two. Budgeting on the assumption of two per month leaves a surplus twice a year and a shortfall in the months you planned around it.

Overtime rules

In the US, the Fair Labor Standards Act requires non-exempt employees to be paid at least 1.5× their regular rate for hours over 40 in a week. Exempt employees — generally salaried workers above a threshold performing certain duties — are not entitled to it. Daily overtime after eight hours exists in some states, notably California, but is not federal law.

Rules differ substantially by country. The multiplier field above will take whatever your contract or jurisdiction specifies.

Common questions

Is this figure before or after tax?

Before. Every number here is gross pay. Net pay depends on your jurisdiction, filing status, pension contributions and local taxes, so no general calculator can produce it accurately.

How do I compare two jobs with different benefits?

Convert everything to an annual figure: salary, employer pension contribution, the market value of health cover, bonus at a realistic probability, and the cash value of extra leave. A job paying $5,000 less with an extra week of holiday and a 6% match often wins.

What hourly rate should I charge as a freelancer?

Start from the salary you want, divide by realistically billable hours — often around 1,000 to 1,300 a year rather than 2,080 — then add the cost of tax, insurance and equipment you now carry yourself. The result is usually a good deal higher than the equivalent employee rate, and correctly so.