Friday, October 21, 2011

George Mindling Column 6-17-2005

How to Figure Your Annual Salary


If you are an hourly worker trying to decide how much you need to earn to afford the lifestyle you want, you need to know your actual annual salary. You may decide further education is needed to enhance your skills and increase your wages, but you still need to know what your time is worth in the work force.

While there are several different methods of converting hourly wages to annual salary, one of the old standards still works as a yardstick in converting wages based on the old forty-hour workweek. The forty-hour workweek, though, may be disappearing from the American work place. In the retail world, or perhaps in the realm of exempt, or true salaried positions, employers expect far more than a forty-hour week. The use of an hourly employee often offers an employer more flexibility than a fixed annual salary. If you are a part time employee working less than 40 hours a week, then multiplying number of hours times wage times number of days worked a year is the best way to determine your annual salary.

Many payroll programs simply use 2080 hours a year, (the basic concept of 8 hours a day times 5 days a week times 52 weeks a year). These programs do not count non-work days. Several programs use 2020 hours a given year to account for non-paid vacation and other non-paid days. Many companies pay vacation from a different accounting fund than salary, although the employee only sees the difference in the tax statement. Many hourly workers simply have unpaid vacations.

Several large companies have used the twenty-one day work period at eight hours a day, twelve times a year to determine annual salary. That results in 2,016 work hours a year. Twenty-one days is a basic formula based on the actual number of workdays in a “generic” month. That eliminates weekends and the average number of non-worked, non-paid days in each given period. Multiply 2,016 times the hourly rate to see what the annual salary would be.

According to recent numbers published by the Sun-Herald, you can expect to start at $7.00 an hour for as a retail salesperson if you have no experience. That calculates to $14,112 annual salary. Of course you can flip that around and divide an annual salary by 2,016 to find the hourly rate. $32,000 a year works out $15.87 an hour, $48,000 would be $23.81 an hour. Using 2080 hours, the flat annual calculation, the rate would be $23.08 an hour.

There are several on-line services that will also convert your figures at the 2080-hour rate. One is Financial Calculators, Inc which has two pages, one for annual to hourly at http://www.fincalc.com/pay_03.asp?id=6 and one for hourly to annual at http://www.fincalc.com/pay_04.asp?id=6.

There are different formulas but you will find they are all very close in their estimations of annual salary. Good to know before you go car shopping or house hunting, especially in today’s housing market.

George Mindling

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