Understanding the Hourly Rate Calculation
To calculate your hourly rate from a monthly salary, multiply the monthly salary by 12, then divide by the hours worked per week. Divide this by the paid weeks worked per year.
For salaried workers, the hourly rate equals the annual salary divided by total hours worked per year. For a 40-hour work week, assume 2,080 hours per year.
For freelancers, the hourly rate equals total income over a period divided by total hours worked, including unpaid hours.
Avoiding Underpricing
To avoid underpricing:
- Calculate an hourly rate to cover expenses.
- Calculate an hourly rate to reach the desired annual salary. Determine the desired monthly salary. Multiply by 12 months. Divide by estimated annual hours worked.
The calculator lets you convert annual, monthly, weekly, and hourly pay rates. It shows how changing one rate affects the others.
Knowing your hourly pay helps compare jobs and set freelance rates.
Manual Calculation of Hourly Rate
To calculate it manually:
- Divide the annual salary by 52 weeks.
- Divide the weekly salary by hours worked per week.
Application for Freelancers and Salaried Employees
To approximate your net hourly rate, divide your net pay on your most recent paystub by the hours worked then.
For example, an annual salary of $50,000, assuming a 40-hour work week and two weeks vacation, the hourly wage is $25.
The hourly rate reflects compensation for each hour worked. It links pay and hours clearly, which benefits employers and employees.