Salary vs Hourly Pay: Comparing Two Job Offers After Tax

Salary vs hourly pay comes down to one question: which offer leaves more money in your account after tax. Put both offers on a yearly basis, take off the hours you would not be paid for, then run each one through withholding and compare the deposits.

Neither kind of pay wins on its own. A $60,000 salary and $28.85 an hour are the same money at 2,080 hours a year. The differences that matter are overtime, unpaid time off, benefits, and how steady the checks are.

Putting both offers on the same yearly basis

Salary offers arrive as a year number. Hourly offers arrive as a rate. Convert one into the other before you compare anything.

Hourly to yearly: multiply the rate by the hours you expect to work in a year. $30 an hour at 40 hours a week for 52 weeks is $62,400.

Yearly to hourly: divide the salary by the same hour count. $60,000 divided by 2,080 is about $28.85 an hour. The salary to hourly converter runs it both ways.

Then break each one into paychecks, because that is what you actually live on. A $60,000 salary paid every two weeks is $2,307.69 of gross pay across 26 checks. The hourly job at $30 pays $2,400 for an 80 hour period, in the periods where you get 80 hours.

The 2,080 hour assumption and when it breaks

2,080 hours is 40 hours times 52 weeks. It is the standard assumption, and it is the piece of the comparison most likely to be wrong for an hourly job.

A salaried employee who takes a week off with pay still earns $2,307.69 that period. An hourly employee who takes the same week off unpaid earns nothing for those 40 hours.

Say the hourly job has no paid holidays and no paid vacation, and you plan to take two weeks off. You work 2,000 hours, not 2,080. At $30 an hour that is $60,000, the same as the salary offer, from a rate that looked 4% higher.

So count the unpaid hours the hourly offer really carries: days the business closes, sick days, slow weeks when the schedule gets trimmed. Multiply those hours by the rate and take them off the top.

Overtime eligibility is part of the offer

Overtime can push the comparison the other way. Hourly jobs are usually nonexempt, which means hours over 40 in a week pay at least 1.5 times the regular rate under the Fair Labor Standards Act. The Department of Labor explains the federal rule, and some states add their own, including daily overtime.

At $30 an hour, overtime pays $45. Four overtime hours a week adds $360 of gross pay to a biweekly check, taking it from $2,400 to $2,760.

That extra pay is taxed like any other wages. FICA takes 7.65% of it, or $27.54. Federal withholding takes roughly your marginal rate, about 12% at this income, so around $43. Close to $289 of the $360 survives before state tax. The FAQ on whether overtime is taxed and the overtime glossary entry go further.

Whether a salaried role is exempt depends on job duties and a minimum salary level, not on the title. If it is exempt, extra hours pay nothing extra. A $60,000 salary worked at 50 hours a week is 2,600 hours, which is $23.08 an hour.

Benefits and paid time off belong in the comparison

Two offers with the same gross pay can differ by thousands of dollars in benefits. Ask for the numbers rather than guessing at them.

What to price out

Your share of the health premium is the big one. Ask what it costs per paycheck, not per month. Premiums taken through a cafeteria plan also cut FICA wages, so $100 a check on the $60,000 salary drops FICA wages to $2,207.69, Social Security to $136.88 and Medicare to $32.01, and it lowers federal withholding too.

A 401(k) match is pay you only get by contributing. A 4% match on $60,000 is worth $2,400 a year if you put in enough to earn all of it.

Paid time off is the quiet difference. Ten paid holidays plus two weeks of vacation is 160 hours. On the hourly offer at $30, those hours are worth $4,800 if they are paid and $0 if they are not.

Compare the two offers after tax, not before

Here are both offers as a single filer paid every two weeks, standard W-4, no pre-tax deductions, before state tax.

Line	Salary, $60,000	Hourly, $30 at 80 hours
Gross per check	$2,307.69	$2,400.00
Federal withholding	$193.08	$204.15
Social Security, 6.2%	$143.08	$148.80
Medicare, 1.45%	$33.46	$34.80
Pay before state tax	$1,938.07	$2,012.25

$92.31 of extra gross turns into $74.18 of extra pay, about 80 cents on the dollar. That is the same arithmetic covered in the guide on what a raise adds to your paycheck.

The hourly column only holds when you get 80 hours. A period with 72 hours pays $2,160 of gross, and every line shrinks with it.

State tax comes off the same wages. California is the calculator’s default, with its own brackets plus state disability insurance, so check the figure on the California paycheck calculator. If the two offers sit in different states, the gap can flip; the guide on take home pay by state shows how far apart the same salary lands.

Questions to ask before you accept

1. How many hours a week can I count on, and who sets the schedule?
2. Is the role exempt or nonexempt, and how is overtime paid?
3. How many paid holidays, sick days and vacation days come with it?
4. What is my share of the health premium per paycheck?
5. Is there a 401(k) match, and what do I contribute to get all of it?
6. Is pay weekly, every two weeks, or twice a month?

Run both offers through the calculator

Enter the salary offer on the salary paycheck calculator and the rate and hours on the hourly paycheck calculator. The paycheck calculator on the home page handles either one with your state, filing status and deductions, so you can read the two net checks next to each other and pick the bigger one.