Converting salary to an hourly rate sounds like one division, but three different hour counts give three different answers, and each answers a different question. Knowing which one you need stops bad comparisons between jobs.
Method 1: paid hours
Hourly rate = annual salary / (hours per week x weeks per year). The standard full-time figure is 40 hours x 52 weeks = 2,080 hours. Example: $60,000 / 2,080 = $28.85 per hour. This is the headline rate most converters show, and it answers: what does each paid hour cost the employer?
If your contract is 37.5 hours a week, the divisor is 1,950 hours, giving $60,000 / 1,950 = $30.77 per hour. Same salary, different hourly rate, because the week is shorter. Always use your actual contracted hours, not a generic 40.
Method 2: worked hours (PTO-adjusted)
Your worked hours are paid hours minus paid time off. With 10 days of holiday and 5 sick days, 15 days x 8 hours = 120 hours off, so worked hours = 2,080 – 120 = 1,960. Effective hourly rate = $60,000 / 1,960 = $30.61 per hour. This answers: what is each hour I actually work worth?
For comparing two offers, use the effective rate. An offer of $62,000 with 10 days off versus $60,000 with 25 days off: the first gives $62,000 / 2,000 = $31.00 per worked hour, the second $60,000 / 1,880 = $31.91. The lower salary is the better hourly deal once time off is counted.
Method 3: what about overtime
If you regularly work unpaid overtime, divide by actual hours worked, not contracted hours. A $60,000 salary at a real 50-hour week is $60,000 / 2,600 = $23.08 per hour, far below the $28.85 headline. This is the number that matters for work-life decisions, and it is the one employers never quote.
If overtime is paid, add it separately: base salary over contracted hours, plus overtime pay at its own rate. Do not blend them into one average unless you are comparing total earnings.
Using the rate
Use the hourly rate to price freelance work: your freelance rate must exceed the salary rate to cover taxes, benefits, gaps between jobs, and your own costs, often by 30 to 50% or more. Use it to judge a pay rise: a 5% rise with 5 extra hours a week is not a rise at all in hourly terms. And use it to value your time: if a task costs less to outsource than your hourly rate, outsourcing buys your time back at a profit.
Negotiating with the hourly number
Convert any raise into hourly terms before accepting it. A $5,000 raise on a $60,000 salary is 8.3%, or $2.40 an hour on a 2,080-hour year. If the new role also adds 5 hours a week, the divisor becomes 2,340 hours, and the new rate is $65,000 / 2,340 = $27.78 an hour, below the old $28.85. The raise is a pay cut in hourly terms.
Use the same maths for benefits: extra holiday days raise the effective hourly rate without changing the salary, because they cut worked hours. Five extra days off on a $60,000 salary lifts the effective rate from $30.61 to $31.25 an hour. Negotiate days off and hours with the same seriousness as salary.
Try it faster with the tool
You can follow every step above by hand, but the free Salary to Hourly Calculator — Convert Annual Pay to an Hourly Rate does the arithmetic for you. Enter your numbers and it gives the answer right away, so you can check your hand calculation or skip straight to the result.
Quick tips
- Headline rate = salary / 2,080 (for a 40-hour week).
- Effective rate divides by worked hours after time off.
- Compare offers on the effective rate, not the headline.