There are many different ways to earn income from employment, each with slightly different effects on taxes, cash flow, and other areas of your life. Some employees are paid hourly, earning a set amount for each hour they work.
Some receive tips and other rewards on an hourly rate only. In addition, some are paid monthly or annually regardless of hours worked.
Also, if you are a business owner, consultant, or freelancer, you may be rewarded for completing certain tasks or milestones. It’s useful to know how to convert hourly wages to yearly wages to compare different jobs.
Difference between hourly wage and salary
Hourly workers receive a fixed amount for each hour worked. So someone who earns $15 an hour and works her 20 hours a week will have a total income of $300 for him (15 times 20). The hourly wage an employee receives is directly correlated to the number of hours worked. The more you work, the more you get paid. If you work less hours, your salary may also decrease.
In contrast, wages for salaried workers are not related to hours worked. Instead, salaried workers are typically rewarded or recognized based on specific achievements and achievements. Unlike hourly employees, salaried employees typically do not need to track hours or record attendance.
However, even if salaried workers are asked to work additional hours, it will not lead to additional income. You may get praise from your boss, but working overtime as a salaried worker will not increase your salary.
Being able to convert hourly wages to yearly wages is useful when comparing two jobs. At first glance, you may not be able to tell if a $25 an hour job will make more, less, or the same as a $50,000 a year job. Thankfully, there’s a simple trick to convert hourly wages to yearly earnings, assuming a 40-hour work week.
This is because the standard annual working hours are about 2,000 hours. In a year he has 52 weeks, which is 2,080 hours if he works 40 hours a week. For convenience, round this to 2,000 hours for ease of calculation. Especially if you work by the hour and take two weeks off a year, that’s 2,000 hours.
Therefore, to convert an hourly rate to a full-time salary, simply multiply the hourly rate by 2 and add 3 zeros. So a job that pays $25 an hour is roughly equivalent to a salary of $50,000 (25 times 2 is 50, and adding 3 zeros equals $50,000).
The following chart shows this calculation using various hourly wages based on a full-time job of 2,000 hours in 52 weeks.
How to convert hourly wage to annual income
This simple multiplication trick only works if you work 40 hours a week. Different weeks have different calculations. Here are some examples you can use.
Get paid for working 40 hours a week
As shown above, if you work 40 hours a week, you can get roughly the same annual salary just by doubling your hourly rate and adding three zeros at the end. Earn $20 an hour while working 40 hours a week Annual income equates to approximately $40,000.
Get paid for working 20 hours a week
If you work part-time, maybe 20 hours a week, the math is pretty straightforward too. If you calculate my hourly wage, it’s in the thousands. 20 hours a week equals 1,000 hours in a year. A person who works 20 hours and earns $30 an hour earns about $30,000 a year.
Get paid for working 30 hours a week
If you work 30 hours a week, the math gets a little more complicated, but it’s still not too difficult. Assuming 30 hours a week, that’s about 1,500 hours a year. So multiplying the hourly wage by 1,500 gives you an approximate annual wage. You could also take the numbers for 20 hours per week and 40 hours per week (this might be easier to do in your head) and divide the difference. Someone who makes $20 an hour and works 30 hours a week would have an approximate annual salary of $30,000 for her.
minimum wage as salary
How you translate a minimum wage job into an annual salary depends on how much you earn per hour and how many hours a week you work on average. The approximate annual salary for a minimum wage job can be calculated by multiplying the hourly rate by his average weekly working hours by 52 weeks per year. For someone who earns $15 an hour and works an average of 27 hours a week, his annual salary would be $21,060 (before tax).
Remember to take overtime into account
If you work by the hour, you can usually receive overtime pay. Overtime regulations vary by state, but overtime is generally paid after a 40-hour workweek or an 8-hour workday. There is also a provision that working for seven consecutive days is subject to overtime pay.
Most overtime is “half an hour”. That is, multiply the base hourly rate by 1.5 for each hour worked. In some cases, you may be called “double time,” meaning your hourly wage is doubled.
In some jobs (trade, emergency services, etc.) overtime pay is a large part of the total compensation. But that means you work these shifts too.
For salaried workers, overtime pay is not incurred. You just get paid no matter what. Whether you work 40 hours a week, 50 hours a week, or 30 hours a week, the pay is the same. It may be a disadvantage depending on the person and position.
If you get paid and find yourself working more than 40 hours a week (or not taking time off), you’re effectively cutting your own salary.
There are two main ways people get paid. salaries or hourly wages. Both payment methods have advantages and disadvantages, but it is convenient to convert hourly wages to annual income. This is useful when comparing compensation for hourly and salaried jobs.
Remember, if you work 40 hours a week, it’s easy to convert your hourly rate into salary. Just double the hourly rate and add three zeros. A $20 hourly wage equates to an annual income of about $40,000.