The standard conversion is optimistic
The usual method divides salary by 2,080 hours — 40 hours across 52 weeks. On $75,000 that gives $36.06 an hour, and it is the figure implied whenever a salaried role is compared to an hourly one.
It is optimistic in both directions. It ignores paid time off, which works in your favour: with four weeks off, you earn that salary across 48 working weeks, making the contracted rate $39.06.
But it also ignores every hour the job takes that nobody pays for. Add five hours of unpaid overtime and five hours of commuting per week, subtract $3,600 of job-related costs, and the real rate falls to $29.75 — about 17.5% below the headline figure.
Why the real rate is the one that matters
The real hourly rate is what lets you make honest comparisons. Two jobs at the same salary can differ enormously once hours and costs are counted.
A $75,000 role with a 20-minute commute and genuine 40-hour weeks pays substantially more per hour than an $85,000 role demanding 55-hour weeks and a 90-minute drive. The second has the higher salary and the lower real rate — and the salary is the number that appears in the offer.
This calculation is also how you evaluate remote work properly. Eliminating a five-hour weekly commute returns 240 hours a year, roughly six working weeks, plus the associated costs. That is often worth more than a raise of several thousand dollars.
It applies to spending decisions too. If your real rate is $29.75, a $600 purchase costs about 20 hours of your life. Some things are still worth it; the point is knowing the exchange rate.
Comparing salaried and contract work
Contractors and freelancers cannot use their salaried equivalent rate, and undercharging is the standard beginner mistake.
A contractor has no paid holiday, no sick leave, no employer pension contribution, and no employer-subsidised health insurance. In the US, self-employed workers also pay both halves of payroll tax — an extra 7.65%. And billable hours are not all hours: time spent on sales, invoicing, and admin is unpaid.
A common rule of thumb is that a contract rate needs to be roughly 1.5 to 2 times the salaried hourly equivalent to be comparable. Converting a $75,000 salary at $36 an hour suggests $54 to $72 an hour as a contractor — and the daily rate figure in this calculator gives a useful starting point for that conversation.
Negotiating with the real number
Once you know your real rate, several negotiations become easier and more concrete.
Additional holiday is worth more than most people assume. Going from four to five weeks off is a 2% raise in real terms, since you earn the same salary across fewer working weeks — and it often costs the employer less than a cash increase.
Remote or hybrid arrangements can be quantified directly: name the hours and costs your commute consumes rather than framing it as a preference.
And when comparing offers, build the comparison on total hours and total costs rather than headline salary. A written comparison of real rates is a stronger negotiating position than a general sense that one offer feels better.
One caveat: this calculator works in gross terms. Take-home pay after tax will be meaningfully lower, and tax treatment differs between employment and contracting.
Frequently asked questions
- Should I count my commute as work time?
- For an honest picture of what your time earns, yes — it is time spent for the job that you would not otherwise spend. The calculator lets you set it to zero if you would rather see the figure without it.
- Why is the contracted rate higher than the standard conversion?
- Because paid time off means you earn the full salary across fewer working weeks. With four weeks off, you are paid for 52 weeks but work 48, which raises the effective rate for hours actually worked.
- How do I convert hourly to salary?
- Multiply by 2,080 for a rough figure — $30 an hour is about $62,400 a year. This assumes no unpaid time off, so subtract accordingly if holiday is unpaid.
- Is this before or after tax?
- Before tax. Job-related costs are subtracted, but income tax is not, so take-home will be lower. Tax rates vary too much by location and circumstance for a general calculator to handle reliably.