Converting Your Hourly Rate to an Annual Salary

A reader asked this question:

“If I am making $15 an hour and my employer changes it to a salary what would the annual difference be?”

Assume your employer does a straight conversion, your weekly pay will be $600, monthly pay, $2,600, and your annual salary, $31,200.

Your annual income would not change. Even if your employer offers to bump up your salary $5000 to $36,200, it may not be a good deal.

When you are paid hourly, you must receive overtime pay when you work more than your 40 hour work week. So if you average 50 hours a week during the year, your salary could actually be more like $40,000.

When you are a salaried or “exempt” employee, you do not get paid overtime. If you average 50 hours a week, you still take home the same pay.

My advice to you is to ask for a raise that will compensate for any overtime you receive throughout the year. Look at your gross income on your tax return from last year, before it is adjusted. That will give you a rough idea on how much you made last year. Some of your income might not be reported as taxable. if you have your W2, it will tell you your salary.

Unfortunately, your employer may be looking to get more hours out of you and not pay for them. I have found that there is a perception that a “salaried” employee is some how more “legitimate.” That is simply not true.

I cover this topic more thoroughly in my post “Is It Better to Earn a Salary or Get Paid by the Hour?“