Wage employees are workers that make a specific amount per hour. Salary workers make a set amount per year or month. Wage to salary is a type of conversion that lets you compare the two.
It helps you see how much an hourly worker would make if they were salaried and earning the same rate. You can also convert an annual salary to hourly wages. This would help you determine how much a salaried employee’s time is worth on an hourly basis.
Why Make Wage-to-Salary Conversions?
Wage-to-salary conversion—as this idea is sometimes known—is used to compare compensation. For example, imagine two workers in the same department are doing the same role.
One is paid a $15/hour wage and one is paid a salary of $40,000. Are they earning about the same? Wage-to-salary conversion helps you compare the two as salaries so you can find out.
Employees sometimes want to see a wage-to-salary conversion to compare how they are paid to other workers. Importantly, wage to salary doesn’t change what a worker earns. It’s just a way of calculating and comparing wages and salaries.
Typically, wage-to-salary calculations are done on wages before deductions—including tax withholdings and employee benefits. A worker’s take-home pay will be lower.
It’s common for workers to have questions about compensation. If your employees want to compare their wages to what they would earn with a salary or have other questions, a platform like Connecteam chat helps. It lets your team members contact you directly to get answers.
How to Calculate Wage to Salary
The wage-to-salary conversion requires you to know a worker’s hours worked and their hourly wage.
If an employee’s hours vary, you might need to first average their hours. To do this, take all the hours worked over the past month and divide by 4. This will give you the average weekly hours worked.
For more accuracy, you can tally up all the hours worked over the past 6 months and divide by 26—the usual number of weeks in 6 months.
Once you understand how many hours an employee works and their hourly wage, simply multiply the number of hours worked in a week by the hourly wage. Then, multiply that number by 52. Since there are 52 weeks in a year, this is the equivalent salary for a year.
We can represent this in a formula:
Hourly rate x hours worked per week x 52 = equivalent yearly salary
Let’s look at an example. If a team member works 40 hours per week at $18 per hour, their equivalent salary would be $37,440 (40 x 18 x 52).
How to Calculate Salary to Wage
As well as being able to do a wage-to-salary conversion, you can also convert an employee’s salary into an hourly equivalent. This calculation can be useful for workers who earn a salary but want to know what their time is worth by the hour.
To start, you will need the hours worked per day and the worker’s salary. If an employee works variable hours, divide the number of hours worked in a month by the number of days the employee worked that month. This should give you an average of hours worked per day.
Once you know the worker’s salary and hours per day, you’re ready. Multiply the number of days the team member works each year by the hours worked daily. This will give you the total hours worked per year. Divide that number by the employee’s yearly salary to get their hourly wage.
We can see this in a formula:
(number of days worked yearly x number of hours worked each dayyearly salary)/yearly salary = hourly wage
Let’s look at an example. If a team member works 7 hours every work day and works 260 days annually, they have 1,820 hours per year (7×260). If they make $90,000 per year, the equivalent they would earn with an hourly wage is $49.45 (90,000/1,820).
Converting wage to salary and salary to wage lets you compare compensation rates for different workers. You can see whether workers are being paid an equivalent amount for the same roles, even if one is paid hourly and one with a salary.
Workers may also want to see this math so they can compare their earnings to other employees. Having the formulas on hand can help answer their questions.
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