Salary vs. Hourly: How to Compare Job Offers
Converting between salary and hourly rate is just the starting point. Benefits, overtime eligibility, and hidden time costs can flip which offer is actually better.
The Basic Conversion
The standard conversion assumes 40 hours per week and 52 weeks per year, giving 2,080 working hours annually.
Annual → Hourly: salary ÷ 2,080
Quick estimate: Annual ÷ 2,000 ≈ hourly rate
| Hourly rate | Annual salary |
|---|---|
| $15/hr | $31,200 |
| $20/hr | $41,600 |
| $25/hr | $52,000 |
| $30/hr | $62,400 |
| $40/hr | $83,200 |
| $50/hr | $104,000 |
| $75/hr | $156,000 |
Why the Basic Conversion Is Just a Starting Point
The raw numbers ignore several factors that can easily shift the effective value by $10,000–$20,000 per year.
1. Benefits Have Real Dollar Value
Employer-sponsored health insurance is often worth $6,000–$15,000 per year (the portion your employer pays). A 401(k) match of 4% on a $70,000 salary is $2,800 in free money. PTO, life insurance, disability coverage, and tuition assistance all have market value. A salaried role with strong benefits at $70,000 can easily beat a $80,000 job with a bare-bones package.
2. Overtime Eligibility
Hourly workers covered by the FLSA earn 1.5× their regular rate for hours over 40 per week. If you regularly work 45–50 hour weeks, that overtime premium significantly increases effective earnings. A $25/hour worker consistently working 45 hours per week earns the equivalent of a ~$58,000 salary despite their base equaling $52,000.
Salaried exempt employees get no overtime regardless of hours worked. A $80,000 salary requiring 50-hour weeks is $30.77/hour effective; the same salary at 40 hours is $38.46/hour.
3. The True Hourly Rate: Account for All Your Time
Your job consumes more than just the hours you are clocked in. Commute time, unpaid prep, after-hours emails, and required training all reduce your effective hourly rate.
Actual time committed: 40 hrs work + 2.5 hrs commute = 42.5 hrs/week
Effective rate: $60,000 ÷ (42.5 × 52) = $27.15/hour
vs. stated rate of $28.85/hour
Contractor vs. Employee: The Self-Employment Tax Factor
If you are comparing a salaried W-2 position to a 1099 contract role, the gap in take-home pay is often larger than it looks. As a contractor, you pay the full 15.3% self-employment tax (Social Security + Medicare), versus only half (7.65%) as an employee whose employer covers the other half.
| Income type | Gross pay | Approx. extra tax vs. W-2 |
|---|---|---|
| W-2 employee | $80,000 | — |
| 1099 contractor | $80,000 | ~$6,100 more in SE tax |
| 1099 equivalent | $87,000 | Roughly equals W-2 $80k net |
This is before accounting for the contractor's lack of employer-paid benefits. A $90,000 contract can easily net less than a $75,000 salaried role once taxes and benefits are factored in.
Building a Full Comparison
When evaluating two offers, build a side-by-side total compensation table:
- Base pay
- + Employer 401(k) match (dollar value)
- + Employer health insurance contribution (dollar value)
- + PTO (days × daily rate)
- + Bonus (expected value, not max)
- − Extra commute cost and time
- − Self-employment tax if 1099
The result gives you a true comparison number. Recruiters rarely present this full picture; doing the math yourself almost always reveals a different ranking than the headline salary suggests.
Key points
- Annual salary ÷ 2,080 = hourly rate. Quick estimate: ÷ 2,000.
- Benefits (health insurance, 401k match, PTO) can add $10,000–$25,000 in real value — always include them in your comparison.
- Hourly workers are typically eligible for overtime; salaried exempt employees are not. Consistent overtime changes the effective pay significantly.
- 1099 contractors pay ~7.65% more in self-employment tax than W-2 employees. Factor that in before accepting any contract role.
Frequently Asked Questions
How do I convert an annual salary to an hourly rate?
Divide the annual salary by 2,080 (52 weeks × 40 hours). A $60,000 salary equals $28.85/hour. For a quicker estimate, divide by 2,000 to get approximately $30/hour — close enough for comparison purposes.
What is the FLSA and how does it affect overtime?
The Fair Labor Standards Act requires employers to pay non-exempt employees 1.5× their regular rate for hours worked over 40 per week. Salaried employees earning above the FLSA threshold ($684/week as of 2024) are generally exempt from overtime. Hourly workers are almost always non-exempt and eligible for overtime.
How do I compare a job with good benefits to one with a higher salary?
Assign dollar values to the benefits: health insurance premiums saved, employer 401(k) match, PTO days (salary ÷ 260 workdays per day), and any other perks. Add those values to the base compensation. A $70,000 job with $15,000 in benefit value beats an $80,000 job with minimal benefits.
What is 1099 vs. W-2 and how does it affect my take-home pay?
W-2 employees have taxes withheld and the employer pays half of Social Security and Medicare taxes (7.65%). As a 1099 contractor, you pay the full 15.3% self-employment tax plus quarterly estimated taxes. A $80,000 1099 contract roughly equals a $68,000–$72,000 W-2 salary in take-home pay, before benefits.
Try it yourself