The Standard Formula and Why It Falls Short
The conventional salary-to-hourly conversion divides annual pay by 2,080 — the number of hours in a standard 40-hour, 52-week work year:
Nominal hourly = annual salary ÷ 2,080
At $75,000 per year, that's $36.06/hr. This is the number most job postings imply, and it's fine for comparing roles with similar expected hours. It breaks down the moment your actual schedule diverges. If you routinely work 50 hours a week, your effective rate drops to $75,000 ÷ 2,600 = $28.85/hr — a $7.21 difference that compounds to roughly $14,400 in undisclosed annual labor.
True Hourly Rate and Unpaid Overtime
The true hourly rate divides your salary by the hours you actually work:
True hourly = salary ÷ (hours per week × working weeks)
Working weeks = 52 minus paid time off. An extra 8 hours a week over 50 working weeks is 400 additional hours — nearly 10 full 40-hour weeks of uncompensated work annually. This is the number that matters when comparing an offer against a contract role with an explicit hourly rate.
Take-Home Hourly After Taxes
Three deductions reduce gross to take-home:
- Federal income tax — use your effective rate from last year's return (total tax ÷ gross income), not your marginal bracket rate
- State income tax — ranges from 0% in Texas, Florida, Washington, and others, to over 13% in California
- FICA — Social Security (6.2%, capped at $168,600 in 2024) plus Medicare (1.45%, no cap) = 7.65% employee share
On a $75,000 salary with 22% federal + 5% state + 7.65% FICA ≈ 34.65% total deduction: take-home ≈ $49,013/year, or $23.56/hr on the standard 2,080-hour baseline.
Total Compensation Per Hour
Benefits are compensation. Employer-sponsored health insurance typically costs $7,000–$15,000 per year per employee. A 401(k) match of 4% on a $75,000 salary adds $3,000. Add dental, vision, and life insurance, and the total often reaches $10,000–$20,000 annually.
Total comp hourly = (salary + annual benefits + 401k match) ÷ actual hours
A $75,000 salary with $12,000 in annual benefits and a 4% 401k match produces total comp of $90,000. At 2,080 hours: $43.27/hr — 20% more than the nominal rate suggests. This gap is the primary reason salaried offers often beat equivalent-rate contract positions on a true cost-of-compensation basis.
What This Calculator Does Not Model
This tool uses a flat effective tax rate, not progressive brackets. Enter the rate from your actual tax return rather than your marginal bracket. Pretax deductions (401k contributions, HSA, FSA) reduce taxable income — if you use them, enter your post-deduction effective rate.
Self-employed and contract workers pay both sides of FICA (15.3% combined vs. 7.65% for employees). The Additional Medicare Tax of 0.9% above $200,000 is not separately modeled — approximate it by adding 0.9% to your federal effective rate. State-specific payroll taxes (California SDI, New York SUTA) are also not included.