Hourly vs Salary: How to Compare Two Job Offers Fairly
A $55,000 salary is not always better than $25 an hour. How to compare pay when hours, overtime and benefits differ.
One offer pays $25 an hour. Another pays a $55,000 salary. The salary looks higher, and on paper it is: $25 an hour for 40 hours a week, 52 weeks a year, comes to $52,000. But the comparison is rarely that simple. Hours, overtime, paid time off and benefits can easily swing the real difference by $10,000 or more.
Step 1: Convert both offers to the same unit
A full-time year has 2,080 working hours (40 × 52). Divide a salary by 2,080 to get its hourly equivalent, or multiply an hourly wage by 2,080 to get a yearly figure:
Hourly equivalent = Salary ÷ 2,080 $55,000 ÷ 2,080 = $26.44 an hour
Our hourly wage tables and salary tables do this conversion for common amounts, including take-home pay by state.
Step 2: Use the hours you will actually work
Salaried jobs often expect more than 40 hours. If the $55,000 job really takes 45 hours a week, its true hourly rate is $55,000 ÷ (45 × 52) = $23.50, less than the $25 hourly job. The opposite is true for hourly work: extra hours earn extra pay.
Step 3: Count overtime
Under the federal Fair Labor Standards Act, non-exempt workers earn at least time and a half for hours over 40 in a week. At $25 an hour, overtime is $37.50 an hour. Five overtime hours every week add $187.50 a week, or $9,750 a year, bringing the hourly job to $61,750.
Salaried employees can also be owed overtime unless they are “exempt”, which generally requires both a salary of at least $684 a week ($35,568 a year) under the federal rule currently enforced and job duties that qualify as executive, administrative or professional. Some states, including California, New York and Washington, set higher thresholds.
Step 4: Account for paid and unpaid time off
Salaried roles usually include paid vacation and holidays. Many hourly jobs do not, and every day off is a day without pay. Two unpaid weeks cut $25 an hour from $52,000 to $50,000. Ten paid holidays plus two weeks of paid vacation on a salaried job are worth about $4,200 at $55,000, since that pay arrives whether or not you work those days.
Step 5: Put a value on benefits
- Health insurance. Employers typically pay most of the premium. For single coverage the employer share is often $7,000 or more a year, and for family coverage several times that. If one job offers no coverage, you would pay this yourself.
- Retirement match. A 4% 401(k) match on $55,000 is $2,200 a year of extra pay, as long as you contribute enough to get it. See the 401(k) match guide.
- Other perks. Bonuses, commuting costs, remote work and paid training all have a dollar value worth estimating.
A worked comparison
| $25/hour job | $55,000 salary job | |
|---|---|---|
| Base pay | $52,000 (2,080 h) | $55,000 |
| Two weeks unpaid time off | −$2,000 | Paid |
| Overtime (5 h a week, 50 weeks) | +$9,375 | Not paid (exempt) |
| 401(k) match | None | +$2,200 |
| Health insurance (employer share) | None | +$7,000 |
| Total value | $59,375 | $64,200 |
| Hours worked per year | 2,250 (45 h × 50 weeks) | 2,160 (45 h × 48 weeks, after vacation and holidays) |
| Value per hour worked | $26.39 | $29.72 |
In this example the salaried job is worth clearly more, mostly because of benefits and paid time off. Without the health insurance, the two jobs would be worth almost exactly the same per hour ($26.48 vs $26.39). Your numbers will differ, so run both offers through the same steps.
Compare take-home pay, too
Taxes do not change the ranking much when both jobs are in the same state, but they matter if the jobs are in different states. The paycheck calculator and the state paycheck pages show how much of each offer you would actually keep.