Salary to Hourly: How to Convert Either Way
Converting salary to an hourly rate is not just dividing by 2,080. Here is how to do it properly, including benefits, PTO and the contractor adjustment.
The quick version: divide annual salary by 2,080 to get an hourly rate, or multiply hourly by 2,080 to get annual. That is 40 hours a week times 52 weeks.
The quick version is also wrong in most real situations. Here is why.
2,080 assumes you work every week of the year
If you take two weeks of unpaid leave, your actual hours are 2,000, not 2,080. If you are salaried with paid time off, you are paid for 2,080 hours but work fewer — which makes your effective hourly rate higher than the simple division suggests.
For salaried workers with PTO, divide by hours actually worked to get your real rate:
- 2,080 hours minus 15 PTO days (120 hours) minus 10 holidays (80 hours) = 1,880 hours
- A $90,000 salary is $43.27/hour on paper, but $47.87/hour against hours actually worked
Benefits are 20% to 30% of the picture
Comparing a salaried offer to an hourly or contract one on rate alone is the most common mistake people make.
A salaried role typically includes employer-paid health premiums, a retirement match, paid leave, disability and life cover. Depending on the employer that package is commonly worth 20% to 30% on top of salary.
The contractor multiplier
If you are moving from employment to contracting, your rate needs to cover things your employer used to pay for.
The biggest is self-employment tax. As an employee you pay 6.2% Social Security and 1.45% Medicare, and your employer matches it. As a contractor you pay both halves — 15.3% — on net self-employment income up to the wage base.
Then add health insurance, retirement you now fund alone, unpaid time off, and unbillable hours spent finding work and doing admin.
A common rule of thumb is to multiply your employee hourly rate by 1.3 to 1.5 to reach a comparable contract rate. A $45/hour employee role is roughly a $58 to $68/hour contract rate before you have made anything extra for the risk.
Overtime
Under the Fair Labor Standards Act, non-exempt employees must be paid at least 1.5 times their regular rate for hours over 40 in a week.
Two details people get wrong: the regular rate includes non-discretionary bonuses and shift differentials, not just base pay. And salaried does not automatically mean exempt — exemption depends on job duties and a salary threshold, not on how you are paid.
Common conversions
| Annual salary | Hourly (2,080 hrs) | Weekly | Biweekly |
|---|---|---|---|
| $40,000 | $19.23 | $769 | $1,538 |
| $55,000 | $26.44 | $1,058 | $2,115 |
| $70,000 | $33.65 | $1,346 | $2,692 |
| $85,000 | $40.87 | $1,635 | $3,269 |
| $100,000 | $48.08 | $1,923 | $3,846 |
| $125,000 | $60.10 | $2,404 | $4,808 |
These are gross figures. Use the state calculators to see what each becomes after tax.
Common questions
How do I convert my salary to an hourly rate?
Divide your annual salary by 2,080, which is 40 hours a week for 52 weeks. For a more accurate figure, divide by the hours you actually work after subtracting paid time off and holidays.
What hourly rate should I charge as a contractor?
A common guideline is 1.3 to 1.5 times the equivalent employee hourly rate. This covers the 15.3% self-employment tax, health insurance, retirement contributions, unpaid time off and unbillable admin hours that an employer would otherwise absorb.
Does salaried mean I cannot get overtime?
No. Overtime exemption depends on your job duties and meeting a salary threshold, not simply on being paid a salary. Many salaried employees are non-exempt and legally entitled to overtime.