Whether you've just got a pay rise, you're looking for a new job, or you simply want to know your hourly rate, it's a question most employees have asked themselves.
Some jobs that pay you an hourly wage will advertise them with the hourly rate, but some jobs will promote the pay as a yearly salary.
It can be challenging to figure out your hourly rate if it's a salary position since you're only told how much you'll earn for the whole year. You'll have to figure out your monthly and hourly rates by yourself – it requires quite a few calculations, but it's not impossible to do.
Luckily, there is a quick shortcut to figuring that out. In this article, we'll explain the best ways to calculate your hourly rate, the difference between earning a salary and a wage, and the pros and cons of both.
How do I calculate my hourly rate?
The fastest and easiest way to calculate your hourly rate is to use a salary calculator. A salary calculator will allow you to enter your gross income and the number of hours you work per week to calculate how much you earn monthly, weekly, daily, and hourly. It will show you how much your gross income is, also known as pre-tax income, as well as what your net income is, also known as take-home pay. Net income is what you're left with once Income Tax, National Insurance contributions, student loan contributions, pension contributions, etc. have been deducted.
Suppose you don't want to use the salary calculator. In that case, there's also the possibility of calculating your hourly rate by hand. However, it will take slightly longer and require more effort on your end. It will also require the need for a calculator. Let's take a look at how to work out your hourly rate by hand.
How to convert annual salary to hourly rate?
Simply follow the step-by-step process that we outline below and apply it to your yearly salary to work out your hourly rate.
To show the process in action, we are going to use an annual gross salary of £40,000 where the person is working 40 hours per week.
Step 1: You first need to divide your annual salary by the total number of weeks in the year, which is 52. This will inform you of your weekly pay. Using an annual salary of £40,000, the calculation is as follows:
- £40,000 per year ÷ 52 weeks = £769.23 per week
Now that we know what your weekly salary is (£769.23), we can move on to the next step.
Step 2: From here, we can look to figure out how much you are paid hourly. To do this, simply divide the weekly salary by how many hours you work each week. In this case, you are working and getting paid for 40 hours each week. Therefore, the calculation is as follows:
- £769.23 per week ÷ 40 hours = £19.23 per hour
This means that for every hour you work, you are getting paid £19.23. If you want to learn how to calculate your hourly rate a little quicker, you can combine both steps together and use the hourly rate formula:
Salary per year ÷ Weeks per year ÷ Hours per week
If you plug in the annual salary, weeks per year, and the number of hours worked per week into the hourly rate formula, you'll achieve the same answer:
- £40,000 per year ÷ 52 weeks ÷ 40 hours per week = £19.23 per hour
As you can see, you have the same hourly rate as you did when doing two separate calculations.
In this first example above, we calculated our hourly rate when working 40 hours per week. However, some employees don't get paid for their lunch breaks and thus are technically paid a different hourly rate. If you are allowed a 30-minute unpaid lunch break each day, that will result in a total number of 37.5 hours worked. Therefore, let's see how the hourly rate of someone with a gross annual income of £40,000 differs when calculating for 37.5 worked hours per week.
Step 1: Divide the annual wage by the total number of weeks in a year. The answer to this step will be the same as the example above since the salary and number of weeks in a year have not changed. The calculation is as follows:
- £40,000 per year ÷ 52 weeks = £769.23 per week
Step 2: Divide the weekly rate by the number of hours worked per week. This is where the hourly rate should look different. Let's take a look:
- £769.23 per week ÷ 37.5 hours = £20.51 per hour
Although the annual salary has stayed the same, as you can see, the hourly rate has changed from £19.23 to £20.51. This is because the number of hours per week the employee is getting paid for has reduced. We can use the hourly rate formula outlined in the previous example to confirm if our calculations are correct.
- £40,000 per year ÷ 52 weeks ÷ 37.5 hours per week = £20.51 per hour
If you have done this calculation and you get a slightly different answer, it could be due to rounding. Rounding the numbers up or down to the nearest pence may slightly alter the exact number. However, this approximate hourly wage with a few pence difference will give you a fairly accurate idea of how much you are getting paid for your time.
How to convert monthly salary to hourly rate?
You will have to do an extra step when calculating your hourly wage from your monthly wage. For this example, we will use a gross monthly salary of £2,000 and assume you are working 40 hours per week. Simply follow the steps outlined below to find your hourly rate from your monthly salary.
Step 1: Multiply the monthly salary by the total number of months in a year, which is 12. This will inform you of your gross annual salary.
- £2,000 per month × 12 months = £24,000 per year
Now that we know your annual salary, we can move on to step 2 of the calculations.
Step 2: Divide the annual salary by the number of weeks in the year, which is 52. This will give you your weekly wage.
- £24,000 per year ÷ 52 weeks = £461.54 per week
Step 3: Divide the weekly wage by the total number of hours worked per week, which is 40.
- £461.54 per week ÷ 40 hours = £11.54 per hour
This means that for every hour you work, you are getting paid £11.54. You may have noticed that the only difference between calculating your hourly rate from a monthly and annual salary is that you first had to convert your monthly salary into an annual salary (Step 1).
Again, there is a formula that consolidates all these steps together, which you can use to speed up the process. It is as follows:
[(Salary per month × 12) ÷ Weeks per year] ÷ Hours per week
To put this to the test, let's plug in our figures.
- [(£2,000 per month × 12) ÷ 52 weeks] ÷ 40 hours per week = £11.54 per hour
As you can see, we have reached the same hourly rate as we did when doing the calculations separately.
How to convert weekly wage to hourly rate?
Calculating your hourly rate from your weekly rate only requires one calculation – dividing your weekly wage by the total number of hours worked each week. If you are earning £1,000 per week and are working 40 hours per week, your hourly rate will be as follows:
- £1,000 per week ÷ 40 hours per week = £25 per hour
How to convert daily wage to hourly rate?
As with the example above, this calculation only has one step – dividing your daily wage by the total number of hours worked each day. If you are earning £90 per day and working 8 hours each day, the calculation is as follows:
- £90 per day ÷ 8 hours per day = £11.25 per hour
What is the hourly rate for the average UK salary?
According to data from Statista, the average salary in the UK is £31,285. Assuming they work 40 hours per week, their hourly rate would be as follows:
Step 1: £31,285 per year ÷ 52 weeks per year = £601.63 per week
Step 2: £601.63 per week ÷ 36.6 hours per week = £15.04 per hour
This means that the hourly rate for the average UK salary is £15.04 per hour.
However, recent data from the Office for National Statistics (ONS) showed that between the months of January and March of 2022, the average hours worked for a full-time employee in the UK was only 36.6 hours. With this in mind, let's calculate the hourly rate for the average UK employee.
Step 1: £31,285 per year ÷ 52 weeks per year = £601.63 per week
Step 2: £601.63 per week ÷ 36.6 hours per week = £16.44 per hour
This means that the average full-time employee in the UK earns £16.44 per hour.
Of course, since the average UK salary data from Statista is for the UK as a whole, this figure is greatly inflated by the average earning figures of London. The average salary in London is £39,716, which is considerably higher than the rest of the UK – the region with the second-highest average salary in the UK is the South East with £32,810. Therefore, if we were to exclude the figures from London, the average hourly rate of full-time workers in the UK would be much lower.
How does earning a salary differ from being paid hourly?
Typically, a salary is given to employees with an agreed length of tenure outlined in their employment contract (in most cases, one year); thus, they work a permanent full-time position. A salaried employee will earn a fixed amount of money each year. For instance, they will have a salary of £30,000 per year, which would translate to £2,500 per month. Also, salaried employees tend to have a monthly pay period, but these pay periods can be different – e.g. bi-monthly (twice a month) – depending on what was agreed on in their employment contract.
An hourly rate, as the name suggests, is a set amount of money that the employer will pay for each hour that is worked. For instance, if your hourly rate is minimum wage, £9.50, and you work 8 hours per day, you will get paid £76 each day. Employees on hourly rates get paid in wages and are typically paid weekly or monthly. As with salaried employees, they too have to pay Income Tax at their applicable tax rate and National Insurance contributions which are automatically deducted from their pay.
What are the pros and cons of earning a salary?
Pros - Consistent pay
Employees earning a salary know precisely how much they are going to make each month and, therefore, over the year. This can help with financial planning for things such as monthly budgeting, savings, mortgage payments etc. Knowing how much money will enter your bank account at the end of each payment cycle can help you plan for the future.
Pros - Employment benefits
Not all employers offer this, but salaried employees are more likely to receive employee benefits. This could be in the form of health insurance, gym memberships, shares in the company, etc. Other forms of employee benefits are discounts in high street stores, better pension contributions, and extra vacation days.
Cons - Lack of paid overtime
Whilst salaried employees may have to work overtime hours, overtime pay is not standard. They are expected to work as long as it takes to get their job done and aren't usually compensated for it. This can be an issue, mainly when there are regular deadlines for projects that require work on the evenings and weekends.
Cons - Stress
Being a salaried employee means you are on a fixed-term, permanent contract. As such, managers can expect more from their subordinates which can lead to excess amounts of work and long hours, thus resulting in increased stress and pressure, which can be a recipe for burnout.
What are the pros and cons of being paid hourly?
Pros - Paid overtime
As opposed to an employee on a salary, earning an hourly wage will mean that you are paid overtime. So you will be paid for every hour you work above your contracted 'normal' hours, and usually at a higher rate than your hourly rate.
Pros - Quicker pay periods
Employees on an hourly wage are usually paid every week or every two weeks. In some cases, hourly-rate employees are paid monthly, however, this is uncommon. If you prefer getting paid every week or two weeks, then a job with an hourly wage may be for you.
Cons - Lack of benefits
Whilst those on an hourly wage will get paid overtime, typically, they do not receive the same employee benefits that are offered to their salaried counterparts. For instance, employers will give you the absolute minimum vacation days and pension contributions that are required by law.
Cons - Lack of hours
Since waged employees are paid hourly, depending on your contract, the employer may be able to cut your hours on short notice. For example, if the business is experiencing financial difficulties or if it's not considered 'busy' at work, they may cut your hours that week or send you home early. This will reduce the number of hours you have worked, thereby reducing your pay. Additionally, in the event that a company is downsizing, employees on an hourly wage are usually the first ones to be let go.