The conversion, in one line
annual = hourly × hours per week × paid weeks · hourly = annual ÷ (hours per week × paid weeks)
At 40 hours a week for all 52 weeks that is 2,080 hours, which is why the quick mental shortcut works so well: double your hourly rate and add three zeros. $25/hour ≈ $50,000 a year. The real figure is $52,000, so the shortcut runs about 4% light — close enough for a first pass, not close enough for a negotiation.
| Hourly | Weekly (40 h) | Monthly | Annual (2,080 h) |
|---|
| $15.00 | $600 | $2,600 | $31,200 |
| $18.00 | $720 | $3,120 | $37,440 |
| $20.00 | $800 | $3,467 | $41,600 |
| $25.00 | $1,000 | $4,333 | $52,000 |
| $30.00 | $1,200 | $5,200 | $62,400 |
| $40.00 | $1,600 | $6,933 | $83,200 |
| $50.00 | $2,000 | $8,667 | $104,000 |
| $75.00 | $3,000 | $13,000 | $156,000 |
| $100.00 | $4,000 | $17,333 | $208,000 |
Unpaid time changes the answer
The 2,080-hour figure assumes you are paid for all 52 weeks. A contractor who takes three unpaid weeks works 49 × 40 = 1,960 hours, so the same $52,000 target needs $26.53 an hour rather than $25.00 — a 6% difference that is easy to miss when quoting a rate.
This cuts the other way too. A salaried employee who is genuinely working 50-hour weeks is earning $52,000 ÷ 2,600 = $20.00 an hour, not the $25.00 the offer letter implied. Putting the hours in the weekly timesheet for a month is the fastest way to find out which number is real.
What the headline number leaves out
Comparing an hourly role with a salaried one on rate alone is usually the wrong comparison. The things that move the total are:
- Overtime eligibility. Hourly staff are typically non-exempt and must be paid a premium beyond 40 hours. Salaried staff who meet an exemption are not — the extra hours are free to the employer. See overtime laws by state.
- Paid leave. Two weeks of paid holiday is worth about 4% of salary; ten paid public holidays is another 4%. An hourly role without them needs a visibly higher rate to match.
- Employer payroll taxes. Contractors normally carry both halves of Social Security and Medicare, roughly 7.65% more than an employee pays on the same income.
- Insurance and retirement. Often the largest single gap, and the one least visible in an hourly figure.
A common rule of thumb for independent contractors is to charge 25–35% above the equivalent employee hourly rate to cover self-employment tax, unpaid leave and benefits. It is a starting point for a quote, not a substitute for working out your own costs.
Why your monthly pay is not annual ÷ 12
It is, if you are paid monthly. If you are paid biweekly you get 26 cheques a year, so each is annual ÷ 26 — which is smaller than half a month's pay. Two months a year contain three biweekly paydays, which is where the sense of an occasional "extra" cheque comes from. Pay periods explained covers the difference between biweekly and semi-monthly, and the years that contain 27 pay periods.
Frequently asked questions
What is $25 an hour annually?
$52,000 a year, working 40 hours a week for 52 weeks (2,080 hours). If three of those weeks are unpaid it falls to $49,000.
How do I convert my salary to an hourly rate?
Divide the annual salary by the hours you are actually paid for in a year. At 40 hours a week for 52 weeks that is 2,080, so $60,000 ÷ 2,080 = $28.85 an hour.
Is 2,080 hours always the right number?
It is the standard assumption, but it ignores unpaid leave and it assumes exactly 52 weeks. A year has 52 weeks and 1 or 2 days, so some years contain 261 or 262 weekdays rather than 260. See work hours in a year.
What hourly rate do I need to earn $100,000?
About $48.08 an hour at 2,080 hours a year. As a contractor with three unpaid weeks it rises to roughly $51.02.
Does this account for tax?
No. Every figure here is gross — before income tax, payroll taxes, pension or superannuation contributions, insurance premiums and any other deduction.
Should a contractor charge the same hourly rate as an employee?
Usually not. Contractors typically carry self-employment taxes, unpaid time off, insurance and their own equipment, which is why quotes often sit 25–35% above the equivalent employee rate.
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