You get two offers: one says "$28/hour," the other says "$58,000/year." Which one is actually better? You can't tell just by looking — you have to convert them onto the same footing first, and even then, pay rate alone doesn't tell the full story. Here's how to compare them properly.
The Basic Conversion Math
The core formula is straightforward:
Hourly → Annual: hourly rate × hours per week × weeks per year
Annual → Hourly: annual salary ÷ weeks per year ÷ hours per week
For a standard full-time schedule — 40 hours a week, 52 weeks a year — $28/hour works out to $58,240/year. That's very close to the $58,000 salary offer, so on paper they look almost identical. But "standard full-time, 52 weeks" is an assumption, and it's worth checking whether it actually applies to your situation.
Why "52 Weeks" Isn't Always Right
Plugging in 52 weeks a year assumes you work every single week without exception. In practice, that's often not true, and using it blindly can make an hourly offer look better or worse than it really is:
- Unpaid time off. If you take 2 unpaid weeks off a year (common for hourly and contract roles without paid vacation), your real working weeks drop to 50 — which lowers your actual annual earnings from that hourly rate.
- Unpaid holidays. Some hourly positions don't pay for holidays the business is closed. If that's 6-8 days a year, it shaves off real income that a salaried employee with paid holidays wouldn't lose.
- Seasonal or part-time work. If the role isn't truly year-round, or hours fluctuate seasonally, use your actual expected weeks worked, not 52.
The fix is simple: don't default to 52 weeks unless your situation is genuinely standard full-time, year-round employment. Use your best honest estimate of weeks actually worked and paid — that's the number that reflects your real annual income.
The Part the Pay Rate Doesn't Show: Benefits
This is the piece that's easiest to overlook and often matters more than a small difference in pay rate. Salaried positions frequently come bundled with benefits that hourly positions may not offer at all — and those benefits have real, calculable dollar value:
- Health insurance — an employer covering some or all of a health plan can easily be worth several hundred dollars a month, sometimes more, depending on the plan and how much of the premium is covered.
- Paid time off — a salaried role with 15 paid vacation days is effectively paying you for time you're not working; an hourly role without PTO does not.
- Retirement matching — if an employer matches, say, 4% of your salary into a 401(k), that's additional compensation on top of your paycheck that a pure hourly rate won't include.
Two offers with nearly identical pay-per-hour can be very different in total value once you account for this. A $30/hour job with no benefits and a $28/hour salaried-equivalent job with full health coverage and matching retirement contributions might actually favor the lower hourly-equivalent number once you add up what the benefits are worth. Always ask what's included, not just what the pay rate is.
Overtime Eligibility
Another real difference between hourly and salaried work is how overtime is handled. In the US, many hourly employees are eligible for overtime pay — commonly time-and-a-half (1.5×) their regular rate for hours worked beyond 40 in a week. Many salaried positions, on the other hand, are classified as "exempt," meaning they aren't eligible for overtime pay regardless of how many extra hours are worked.
This matters both ways: an hourly role with regular overtime can end up paying meaningfully more than its base rate suggests, while a salaried "exempt" role with a heavy workload might involve unpaid extra hours that quietly lower your effective hourly rate. Overtime eligibility rules vary by classification, employer, and location — this is general information, not legal advice, so if overtime status is unclear or important to your decision, ask the employer directly how the role is classified.
How to Compare Two Offers
Once you know your realistic weeks worked and have a sense of the benefits gap, use our free Salary to Hourly Converter to put both offers on the same footing:
- For the hourly offer, enter the hourly rate, hours per week, and your realistic weeks per year (not automatically 52 if it doesn't apply).
- For the salaried offer, enter the annual salary along with the same hours-per-week and weeks-per-year assumptions so the comparison is apples-to-apples.
- Compare the resulting annual and hourly equivalents side by side.
- Layer the benefits difference on top mentally — if one offer includes health insurance or retirement matching and the other doesn't, factor in a rough dollar estimate before deciding.
FAQ
Is a higher hourly rate always better than a lower salary? Not necessarily. It depends on actual weeks/hours worked, whether overtime applies, and — often most importantly — whether benefits like health insurance and retirement matching are included in one offer and not the other.
How do I estimate the dollar value of benefits? A rough approach: look up what an equivalent individual health plan would cost you out of pocket per month, add the annual value of any paid time off (daily rate × number of paid days), and add any retirement match as a percentage of salary. It won't be perfectly precise, but it gets you a real comparison number instead of ignoring benefits entirely.
Should I use 40 hours a week if my job sometimes runs longer? Use your best realistic average. If overtime is frequent and paid, you can run the numbers both with and without expected overtime to see the range. If extra hours are unpaid (common for some exempt salaried roles), your effective hourly rate is lower than the base calculation shows.
Is this general guidance or legal/financial advice? General information only. Overtime eligibility, exempt classification, and benefits laws vary by country, state, and employer — for anything with real stakes, confirm the specifics with the employer or a qualified professional.