How to Convert an Hourly Wage into an Annual Salary
How much do you make in a year? If you’re not on salary this can be a hard question to answer. Fortunately, it’s not difficult to learn how to convert an hourly wage into an annual salary, or a good approximation of it.
The first thing you need to determine is whether or not you want to calculate your gross annual salary or your annual take home pay. The first requires a calculation that you can make from just your hourly wage, and the second probably requires taking a look at your paycheck stub.
Knowing how to convert an hourly wage into an annual salary can be important for filling out documents and credit applications, and you should probably know how to do it. Most things like this will be asking for your gross annual salary, and all that is required to generate this figure is a little basic math.
Using a few simple techniques, we will see:
- How to convert an hourly wage into an annual salary
- How to calculate part-time hours
- How changes in salary and hours will affect you annual income
Say, for example, that you make $12.75 an hour and work forty hours a week. There are fifty-two weeks in a year. Forty hours time fifty-two weeks is 2080. Therefore, if you multiply your hourly wage by 2080, you will have your gross annual salary. In this case, $12.75 times 2080 is $26,520 per year.
Even if you frequently work overtime, you generally leave this out of your figures. If you only work part-time, however, and never work a full forty-hour week, you should take this into account.
Let’s say that you work twenty-five hours a week, but not during December and January, and make $13.25 an hour. We go through the process in the same way. There are fifty-two weeks in the year, but you only work on forty-four of them, because you do not work the eight weeks of December and January. Forty-four weeks times twenty-five hours per week is 1100 hours per year. Multiplying this by your hourly wage of $13.25 means that your annual salary is $14,575 a year.
You can use this same technique to figure out how promotions or changes in how many hours you work will affect the amount of money you make during a year. If you currently work a forty-hour week at $14.50 an hour and are thinking about cutting back to a thirty-five hour week, you can figure out the difference like this.
By multiplying $14.50 by 2080, which is forty hours a week for fifty-two weeks, you see your present salary is $30,160 a year. At thirty-fire hours per week times fifty-two weeks, you salary would be $26, 390. By subtracting one from the other you see that you will make $3,770 less per year. Knowing this you have the information you need to determine whether or not it is worth changing.
There is, however, a wrinkle that is going to make a difference if you are trying to figure out how much money you will actually be bringing home every month. Because the tax system in this country is done by income brackets, just knowing how to convert an hourly wage into an annual salary won’t tell you everything you need to know. In certain cases making a few dollars less in a year will save you considerably more in taxes, and conversely an extra thousand dollars could push you into a higher tax bracket and cost you more.
The rules that determine how much you pay in taxes, and how that affects you take home pay are extremely complicated, and you will probably want to see an accountant if you have serious concerns in this matter. We can do some approximations of take-home pay, however, that will be useful as guides.
Start by taking a look at your paycheck. Let’s say you make about $14.75 an hour. That would be about $1,180 every two weeks at forty hours a week. Notice, though, that your take home pay is probably about $940 dollars depending on your state and how you filled out your W-4 withholding form.
You can see that how to convert an hourly wage into an annual salary will be different if you’re trying to figure out how much you actually bring home every year. How different. Let’s use the same example.
At $14.75 an hour at full time, your annual salary will be $30,680 (14.75x40x52). Your take home pay at about $940 every two weeks works out to $24,440 a year, a difference of more than $6000.
To arrive at your annual take-home salary, you simply multiply the amount you make per paycheck by the number of pay periods in a year. If your employer pays you weekly, this will be 52. If you are pain bi-weekly, cut this number in half and multiply by 26 instead. If you have a different pay scale (for example monthly or on the first and fifteenth of every month) it will be much more difficult to approximate this accurately. You might want to average four or five paychecks to get a good figure to use.
When you do this kind of calculation you do want to make sure that the paycheck you are using is roughly average. If you typically get a lot of overtime around the holidays, this is not the check you want to use to make your calculations. Again, you may want to average a few checks together.
To do this, total up three or four checks and divide by the total number of checks. Say that your last three paychecks were $947.25, $960.20, and $930.43. Adding these together gives you $2837.88. Divide this by three and you see that your average paycheck is $945.96. The more checks you include in your average, the more accurate your calculations will be.
This is about all you need to know about how to convert an hourly wage into an annual salary. With a few simple calculations like these, you can start to get a handle on your finances. At least you will have a better idea of what your time is worth.