Convert between hourly and annual salary — and see the real take-home difference after taxes. Is that salary offer actually a raise or a cut?
Converting between hourly and salary isn't just math — it's a full picture of your compensation. A $75,000 salary and a $36/hour rate look similar on paper, but the actual comparison depends on hours worked, overtime eligibility, benefits, and flexibility. Salaried employees often work more than 40 hours without extra pay. Hourly workers get overtime but may face variable hours, reduced benefits, and less job security.
If you earn $80,000 per year and regularly work 50 hours per week instead of 40, your real hourly rate isn't $38.46 — it's $30.77. That 10 extra hours per week over 50 weeks adds up to 500 hours of unpaid time. This is an important calculation for anyone considering a job change between hourly and salaried positions, especially in industries where overtime is the norm.
Salaried positions typically include health insurance, paid time off, retirement contributions, and other benefits that can add $10,000 to $25,000 in annual value. When evaluating an hourly position, factor in the cost of replacing those benefits independently. A $40/hour contractor rate sounds better than a $70,000 salary until you price out individual health insurance and account for unpaid time off.
Under the Fair Labor Standards Act, non-exempt hourly employees must be paid 1.5x their regular rate for hours over 40 in a workweek. Salaried employees classified as exempt — typically those earning above the FLSA threshold and in qualifying roles — are not entitled to overtime regardless of hours worked. Misclassification is common and costly; if you're salaried but your role doesn't meet the legal exemption test, you may be owed overtime.
Hourly and salaried income are taxed identically by the IRS — both are ordinary income subject to federal brackets, state income tax, Social Security, and Medicare. The difference is consistency of withholding. Salaried employees have predictable withholding each pay period. Hourly workers with variable hours may have withholding that doesn't match their actual annual liability, requiring a W-4 adjustment or quarterly estimated payments.
Hourly arrangements favor workers in industries with genuine overtime opportunity, in high-demand skill areas where rates are rising, or when flexibility to work for multiple clients is valuable. For consultants, contractors, and skilled tradespeople, an hourly rate that accounts for self-employment tax, benefits, and business expenses should be 30% to 50% higher than the equivalent salaried role to come out even after all costs.