If you search for how to turn a salary into an hourly rate, you will find the same advice everywhere: divide by 2,080. The number comes from a 40-hour week worked for all 52 weeks of the year.
It is a fine convention for comparing job offers quickly. It becomes misleading when your real schedule is different, and for a lot of people it is.
The standard calculation
Hours in a year
40 h × 52 wkequals2,080 h
Hourly rate
$60,000 ÷ 2,080 hequals$28.85/h
This treats every week of the year as a working week. If your paid holidays are included in the salary, that is correct: you are paid for 52 weeks whether or not you are at your desk.
When your weeks are different
If you take unpaid time off, or you are a contractor who only gets paid for the weeks you work, you should divide by the weeks you are actually paid for. Two weeks off changes the result more than people expect.
Hours in a year
40 h × 50 wkequals2,000 h
Hourly rate
$60,000 ÷ 2,000 hequals$30.00/h
When your hours are different
Plenty of contracts are built around a 37.5-hour week, and plenty of contractors work fewer weeks a year. Here is a $75,000 contract at 37.5 hours a week for 48 weeks.
Hours in a year
37.5 h × 48 wkequals1,800 h
Hourly rate
$75,000 ÷ 1,800 hequals$41.67/h
Using 2,080 hours here would give $36.06 an hour, which understates what the contract really pays for each hour worked.
Which number should you use?
- Comparing two salaried job offers: 2,080 is fine, as long as you use it for both.
- Comparing a salary with a contract: use the real hours and paid weeks for each.
- Setting a freelance rate: do not start from salary at all. Start from your income goal and billable hours instead.
All of these figures are before tax. For freelancing, the gap is bigger again, because you also cover your own expenses, benefits and the employer's share of payroll tax.
Tip: Going from employee to freelancer? Our freelance rate guide shows why the right rate is often more than double the salary figure.