TLDR: Whether you are salaried or not, finding your real "hourly rate" is useful when making career decisions. This guide shows several ways to do it.
I think newer salaried workers tend to view their paycheck in a vacuum: "The company pays me X, so I earned X". In reality, your pay is devalued by any costs that you bear in order to do the job in the first place. Those costs can be tangible (i.e. equipment, fees), or intangible (i.e. mental health). The more you can factor these costs into your pay, the easier it is to see whether your paycheck is providing as much value as you think.
Common ways to capture these extra costs:
- Subtract any extra work expenses from your salary (i.e. fuel)
- Add any lost personal time to your total hours worked, starting with the standard 2088 work hours per year (or 260 workdays per year) and adjusting from there.
- Divide your adjusted salary by your adjusted hours-worked, to find your 'real' hourly wage.
Below is an example that shows how commute time and fuel costs can affect the value of a $60k/yr job.
# Hourly rate for a $60k salaried job in the U.S. $60,000 / 2088 = $28.74/hr # Say it takes you 20 minutes to get to work. How much is that per year? 20-minute commute = 0.33 hrs, Round trip: 0.66 hours/day 0.66 hours/day x 260 workdays/yr = 171.6 total hours of driving # Add your travel time to total hours worked 2088 + 171.6 = 2259.6 total hours/yr # Subtract fuel costs from your salary (www.gasbuddy.com/TripCostCalculator) Fuel cost: $1.53/day x 260 workdays = $398/yr Salary minus fuel: $60,000 - $398 = $59,602 # With adjusted salary and time 'at work', what is your new hourly rate? New hourly rate: $59,602 / 2259.6 = $26.38/hr
So with travel and fuel, your 'hourly wage' went from $28.74/hr down to $26.38/hr.
That looks pretty tame. But let's say you are offered a new job that pays $72,000 (a 20% raise!). However, it requires a 60-minute commute time. Is it worth the extra pay?
Hourly rate @72k: $72,000 / 2088 = $34.48/hr # Add travel time to work time 60-minute commute: 2 hours/day, or 520 hours/yr work + commute: 2088 + 520 = 2608 hours total/yr # Don't forget the cost of fuel Fuel cost: $6.27/day, or $1630/yr (https://www.gasbuddy.com/TripCostCalculator) Salary minus fuel: $72,000 - $1630 = $70,370 # With adjusted salary and time 'at work', what is your new hourly rate? New hourly rate: $70,370 / 2608 = $26.98/hr
Your new effective hourly wage would be $26.98/hr, or only 60 cents more than your current $60k job. That $12k raise is gobbled up by the cost of fuel, as well as the (hypothetical) value of your commute time.
You can get more elaborate by factoring in taxes, overtime, cost of living, etc. but the exercise is the same: either subtract their dollar value from your salary, or add the extra time to your work hours. Putting a dollar value on your time doesn't always make sense, but it is a simple way to estimate the opportunity cost of losing that free time when work is involved.
Submitted February 18, 2019 at 11:17PM by feistypenguin http://bit.ly/2T2Umkm
