How to Convert Your Salary to an Hourly Rate
The formula is straightforward: divide your annual salary by 2,080 (40 hours × 52 weeks). A $68,000 salary = $32.69/hour. But that number is misleading if you're using it to compare a salaried job to freelance work, because it ignores the 20–40% of your compensation that comes as benefits: health insurance, 401(k) match, PTO, and employer-paid taxes.
Here's the simple formula, the real formula, and why the difference matters when you're deciding between a W-2 and going independent.
The Simple Formula
Annual salary ÷ 2,080 = hourly rate
2,080 is the standard number of working hours per year (40 hours × 52 weeks).
Megan's math: $68,000 ÷ 2,080 = $32.69/hour.
So $50/hour freelance vs. $32.69/hour salaried. Freelancing wins, right? Not so fast.
The Real Formula: Account for Benefits
Megan's $68,000 salary comes with:
- Health insurance: Employer pays $8,400/year of her premium
- 401(k) match (4%): $2,720/year
- PTO (15 days): $3,923 in paid time off
- Employer FICA (7.65%): $5,202 (she doesn't see this, but it's part of her cost to the company)
Total compensation: $88,245
Real hourly rate: $88,245 ÷ 2,080 = $42.43/hour.
Now the comparison is $50/hour freelance vs. $42.43/hour total comp. The gap narrows. And as a freelancer, Megan would pay self-employment tax (15.3%) and buy her own health insurance ($400–$600/month). After those costs, her $50/hour might net closer to $38–$40/hour.
Other Formulas You Might Need
Monthly salary to hourly: Monthly pay × 12 ÷ 2,080. If Megan earns $5,667/month: $5,667 × 12 ÷ 2,080 = $32.69.
Weekly salary to hourly: Weekly pay ÷ 40. If Megan earns $1,308/week: $1,308 ÷ 40 = $32.69.
Hourly to salary: Hourly rate × 2,080. $50/hour × 2,080 = $104,000 equivalent salary.
What Megan Decided
She did the math and realized $50/hour freelance was roughly equivalent to her current $68K salary after accounting for self-employment tax, health insurance, and no PTO. She'd need at least $65/hour to make freelancing a clear financial upgrade.
She took the freelance gig as a side project. evenings and weekends at $50/hour while keeping her day job. Best of both worlds until she can command higher rates.
Frequently Asked Questions
How many work hours are in a year?
2,080 is the standard (40 hours × 52 weeks). If you work 50-hour weeks, use 2,600. If you take unpaid time off, subtract those hours.
What hourly rate equals $100,000 salary?
$100,000 ÷ 2,080 = $48.08/hour. But if your salary includes strong benefits, the true equivalent hourly rate is $55–$60+.
Should I include benefits when comparing salary to hourly?
Yes. Benefits add 20–40% to the value of a salary. Ignoring them makes hourly rates look better than they are, which can lead to bad career decisions.