Calculate Annual Salary

Knowing how much money you earn per year is an important first step in managing your finances and developing a budget. This article will show you two different methods for calculating your annual salary, depending on how and how often you are paid.

10 Second Summary

  • For hourly wage earners: Multiply your hourly salary by the number of hours you work per week. Multiply the answer by 52 to get your annual salary. Add in overtime payments, and adjust for sick time, vacation, or a leave of absence.
  • For salaried employees: Multiply your total gross earnings (before deductions) by the number of paychecks you receive each year. The answer is your total annual salary. Add in bonuses, if applicable.

Steps

Calculating Annual Salary for Wage Earners

  1. Determine if you are a wage earner. A wage earner is paid by the hour. If you receive a pay rate per hour multiplied by the number of hours worked per week, then you are a wage earner. Another term for this is a non-exempt employee. Your paycheck may vary from week to week depending on the number of hours you work. If you work the same number of hours each week but you are still paid by the hour, then your paycheck may be the same each week, but you are still considered a wage earner.[1]
  2. Find out your hourly salary. If you are not sure how much you earn per hour, ask your supervisor or someone in human resources. Alternately, calculate the information from your pay stub. Locate the total gross pay on your pay stub. Gross pay is your total salary before deductions for taxes and benefits. Divide that amount by the number of hours you worked in that pay period.
    • For example, suppose your gross pay was $190 for a week in which you worked 10 hours. Calculate $190 / 10 = $19. Your hourly salary is $19 per hour.
  3. Multiply to calculate your annual salary if you work a fixed number of hours per week. Multiply your hourly salary by the number of hours you work per week to calculate your weekly salary. Multiply this figure by 52, the number of weeks per year, to work out your annual salary.[2]
    • For instance, if you work 40 hours per week and you earn $19 per hour, calculate your weekly salary by multiplying 40 x $19 = $760.
    • Then calculate your annual salary by multiplying $760 x 52 = $39,520
  4. Average your weekly number of hours if you work a different amount each week. If you work a different number of hours each week, keep track of your weekly hours for one month. Then find the average number of hours per week you worked, and multiply to find your annual salary.
    • For example, suppose in one month you worked 30 hours the first week, 25 hours the second week, 35 hours the third week and 40 hours the fourth week. Find the average weekly hours with the equation (30 + 25 + 35 + 40) / 4 = 32.5.
    • If you earn $19 per hour, then calculate your annual salary with the equation (32.5 x $19) x 52 = $32,110.
    • Keep track of your weekly hours with spreadsheet software or a time-tracking app. Some time-tracking apps are marketed to managers who have to keep track of hours for multiple employees. But individuals can also use them to manage their productivity.[3]
  5. Add in overtime payments if applicable. An employer must pay you overtime if you work more than 40 hours per week. The rate is one and a half times your regular rate of pay. Keep track of your regular and overtime hours each week for a period of four weeks. Calculate the average number of regular and overtime hours and work out your weekly and annual regular and overtime pay. Add these together to determine your annual salary.[4]
    • Suppose in a four week period, you work 50 hours, 45 hours, 42 hours and 47 hours. If anything over 40 hours is overtime, then your weekly overtime is 10 hours, 5 hours, 2 hours and 7 hours. Calculate your average weekly overtime hours with the equation (10 + 5 + 2 + 7) / 4 = 6.
    • If you earn $19 per hour, then calculate your overtime rate with the equation $19 x 1.5 = $28.5
    • Calculate your average regular weekly salary with the equation $19 x 40 = $760. Calculate your average weekly overtime pay with the equation $28.5 x 6 = $171. Add these two totals to get your total weekly salary $760 + $171 = $931.
    • Multiply to find your annual salary with the equation $931 x 52 = $48,412.
  6. Adjust for sick time, vacation or a leave of absence. If you are paid for vacation or sick time, then you do not need to adjust any of your calculations. However, if you do not get paid for these absences, then this changes the number of weeks per year for which you get paid. Suppose, for example, that you take 2 weeks of unpaid vacation time per year. Then your work year is only 50 weeks instead of 52. Use the adjusted number of weeks per year to calculate your annual salary.
    • To get an exact number, subtract hours for days each year when you don't work (holidays, vacation days). These should only be subtracted if they are unpaid. For example, if you only missed two days per year, you would subtract $19 x 8 hours per days x 2 days, or $304, from your annual salary.

Calculating Annual Pay for Salaried Employees

  1. Determine if you are a salaried employee. Salaried employees receive a fixed amount of gross pay in their paychecks. This amount is not linked to the number of hours worked. Their annual salary is divided by the number of pay periods per year to calculate the amount of gross pay for each pay check. This is also know as an exempt employee.[5] If you are a salaried employee, you were likely told your total annual salary when you were hired. However, over time, raises and other changes in pay may make it confusing to know your total annual salary.
  2. Read your pay stub. Your pay stub provides a great deal of information. It lists your total earnings, or gross pay. It details any deductions, including federal, state and local taxes, and Social Security and Medicare contributions. Other deductions include health insurance premiums, retirement savings plans and flexible spending accounts. Your take home salary, or net salary, is your gross salary less all of the deductions.[6] Find your total earnings, or gross pay, to determine your annual salary.
    • You should still receive a pay stub even if you get direct deposit. Some companies keep pay stub information in an online database. Contact your payroll department to find out how to log in to obtain that information or to receive a hard copy of your pay stub.
  3. Verify your payroll schedule. Employers choose a payroll schedule that best suits their company and employees. The payroll schedule determines when and how often you will receive a paycheck. Knowing your payroll schedule will tell you how many paychecks to expect per year.[7] You will need this information to calculate your annual salary from your pay stub. If you are not sure about your payroll schedule, ask your supervisor or the payroll department of your company.
    • Monthly paychecks are paid at the end of the month. Employees receive 12 paychecks per year.
    • Semi-monthly paychecks are paid on the 1st and 15th of the month or the 15th and 30th. Employees receive 24 paychecks per year.
    • Biweekly paychecks are paid every two weeks, usually on Friday. Employees receive 26 paychecks per year.
    • Weekly paychecks are paid once per week, usually on Friday. Employees receive 52 paychecks per year.
  4. Determine overtime pay. Recent changes to overtime pay laws have extended overtime protections for salaried workers. As of 2016, any salaried worker making less than $47,476 per year ($913 per week) is entitled to overtime pay at a rate of 1.5 times their usual pay rate for hours worked over 40 hours each week. If your salary is under this threshold and you work more than 40 hours per week, you can increase your expected pay by the amount of your overtime earnings.[8]
    • For example, a salaried employee paid $41,600 per year ($800 per week or $20 per hour) that works 45 hours (5 overtime hours) each week can expect overtime pay in the amount of 1.5 times their usual hourly pay.
    • This would be <math>1.5\times$20\times\text{5 hours}</math>, or $150, per week.
  5. Calculate your annual salary. Find your total gross earnings, before deductions, on your pay stub. Multiply this amount by the number of paychecks you receive each year to calculate your total annual salary.
    • Suppose you are paid biweekly, and your total gross salary is $1,900. Calculate your annual salary with the equation $1,900 x 26 = $49,400.
  6. Add in bonuses if applicable. Depending on the type of company for which you work and the position you hold, you may be entitled to bonuses. Bonuses are paid at different times during the year, and they are in addition to your fixed annual salary. Different kinds of bonuses include profit sharing, rewards for achievement, sign-on bonuses, holiday bonuses and sales commissions. The amount and frequency of bonuses varies depending on how your company awards them.[9] Add bonuses in when calculating your total annual salary.
    • For example, suppose you earn an annual salary of $49,400 before bonuses, and your company has decided to award you a 2.5 percent profit sharing bonus. Calculate the amount of the bonus with the equation $49,400 x .025 = $1,235. Calculate total annual salary with the equation $49,400 + $1,235 = $50,635

Determining Your Market Value

  1. Understand why knowing your salary information is important. You must know your annual salary in order to determine if your job is going to pay you enough to support your lifestyle. Assess your financial needs and plan your budget. Then determine if your annual salary is going to be enough to pay all of your bills and allow you to accomplish your goals. Besides knowing your annual salary, learn about other important ways you are compensated. For example, know what benefits are available to you, such as tuition reimbursement, retirement plans and health insurance. Also, find out if there is room for advancement and the potential to earn more money.[10]
  2. Research salary information for different careers. If you aren't already established in an industry or are thinking about switching careers, use online resources to learn about the kind of salary you are likely to earn in different industries.[11] Search for a particular job or industry. Find out about basic salary information for different positions within that industry. Learn about typical benefits packages.[12] Compare salary averages and hourly wage rates in different locations of the country.[13]
    • You may also be wondering if you're being paid properly for your current work. If so, you can estimate your market value by researching compensation for similarly-experienced and employed workers in your industry and area. Use the tools mentioned above to determine whether or not you are being paid adequately.
  3. Develop realistic expectations. As you research salaries for different occupations, understand the difference between “average” and “entry level.” If you are new to an industry or just starting out in an occupation, do not expect to earn the average salary right away. Entry level salaries are typically lower than the average rate. However, your salary should increase as you gain experience. Research the potential for salary growth in your chosen industry.[10]
  4. Choose the right job for you. You may find yourself in a position to compare the salaries of two or more jobs. Perhaps you are looking for a job, or maybe you are considering leaving your current job for something else. Naturally, the total salary offered is a major consideration. Other factors that may also be valuable to you include benefits, the potential for growth, the location and the length of your commute.[10]
    • Sometimes it is prudent to choose a job with a lower salary because of growth opportunities, location, or workplace culture.
  5. Determine your market value. Once you know your total annual salary and you have a realistic expectation of what you should be earning in a specific field, you can use this information to negotiate salaries in future jobs. Compare the total annual salary you currently earn with others in your field or in other industries you are considering. If your research indicates that you could be earning more, arm yourself with solid data and negotiate a better salary. Move from up from an entry-level position to something more advanced. Or, request a review of your salary based on your education level or your special skills or qualifications.[10]
    • Your market value is influenced by your education, experience, and other assets you bring to the table. Consider every way in which you create value for your employee when determining your market value.

Free Downloadable Calculators

Doc:Annual Salary Calculator,Annual Salary Calculator (Hourly)

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Sources and Citations

  1. ↑ http://www.accountingtools.com/questions-and-answers/what-is-the-difference-between-salary-and-wages.html
  2. ↑ http://www.hourlysalaries.com/
  3. ↑ http://www.entrepreneur.com/article/218171
  4. ↑ http://washingtonovertimelaw.com/Calculating_Overtime_Pay.html
  5. ↑ http://www.accountingtools.com/questions-and-answers/what-is-the-difference-between-salary-and-wages.html
  6. ↑ http://www.credit.com/personal-finance/how-to-read-your-paycheck-stub/
  7. ↑ http://www.entrepreneur.com/article/234814
  8. ↑ https://www.dol.gov/featured/overtime
  9. ↑ http://www.salary.com/types-of-bonuses/
  10. ↑ 10.0 10.1 10.2 10.3 http://www.gcflearnfree.org/careerplanningandsalary/salary-basics/full
  11. ↑ http://www.salary.com/
  12. ↑ http://www.myplan.com/index.php
  13. ↑ http://www.careeronestop.org/JobSearch/Interview/negotiate-your-salary.aspx?&frd=true

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