The basic difference

Hourly pay means you earn a set rate for each hour worked. Most hourly workers are non-exempt under the Fair Labor Standards Act, so they must be paid at least one and a half times their regular rate for hours over 40 in a workweek. Work fewer hours and your paycheck shrinks; work more and it grows.

Salary means you earn a fixed amount per year, paid in equal installments, regardless of the exact hours worked in a week. Many salaried workers are exempt from overtime, which means a 50-hour week pays the same as a 40-hour week.

Being paid a salary does not automatically make a job exempt. Under federal rules, an exempt employee must earn at least $684 a week, or $35,568 a year, be paid on a true salary basis and do work that meets the duties test for executive, administrative or professional roles. Salaried workers who fail any of those tests are owed overtime too.

Step 1: Put both on the same scale

A full-time year is usually counted as 40 hours a week for 52 weeks, or 2,080 hours. That gives two quick conversions:

So $25 an hour is $52,000 a year, and a $55,000 salary is about $26.44 an hour. On paper, the salary wins by $3,000. The Hourly to Salary Calculator and Salary to Hourly Calculator do these conversions for any schedule.

Step 2: Use the hours you will really work

The 2,080-hour conversion assumes a 40-hour week. Many salaried jobs run longer, and extra hours lower your real hourly rate. Here is what common salaries work out to per hour at different weekly hours:

Hourly, non-exempt workers move the other way. Extra hours raise their pay, and hours over 40 pay 50% more. At $25 an hour, a 45-hour week pays $1,187.50 and a 50-hour week pays $1,375.00. Over a year, that is:

1. $25/hr at 40 hours a week$52,000
2. $25/hr at 45 hours (5 overtime)$61,750
3. $25/hr at 50 hours (10 overtime)$71,500
4. $55,000 exempt salary at any of these hours$55,000

If the job regularly runs 45 hours, the $25 hourly job pays $6,750 more than the $55,000 salary, even though the salary looked better at 40 hours. Our guide on how to calculate overtime pay covers the rules in detail.

Step 3: Account for paid time off

The 2,080-hour figure also assumes you are paid for all 52 weeks. Salaried jobs usually include paid holidays and vacation. Some hourly jobs do too, but others pay nothing for days you do not work.

At $25 an hour, every unpaid 8-hour day costs $200. Ten unpaid holidays and vacation days in a year would cost $2,000, bringing a 40-hour schedule down from $52,000 to $50,000. Always ask how many paid days off each offer includes.

Step 4: Add the value of benefits

Benefits are a large part of what a job is worth. The Bureau of Labor Statistics reported that in June 2026, private employers spent an average of $46.89 per hour worked on compensation: $32.82 on wages and salaries and $14.07 on benefits. That means benefits made up 30.0% of the total, or about 43 cents for every dollar of wages.

Benefits worth comparing include:

• Health insurance. The share of the premium your employer pays can be worth thousands of dollars a year.
• Retirement match. A 401(k) match of 4% on a $55,000 salary adds $2,200 a year.
• Paid time off. Paid vacation, holidays and sick days, covered in Step 3.
• Other perks. Life and disability insurance, tuition help, commuter benefits and bonuses.

Hourly roles can include strong benefits too, especially full-time positions at large employers, so compare each offer's actual package rather than assuming.

A special case: contract hourly work

Some hourly jobs are independent contractor roles paid on a 1099 form rather than a W-2. Contractors usually get no benefits and pay both the employee and employer shares of Social Security and Medicare, a 15.3% self-employment tax on most of their net earnings, instead of the 7.65% an employee pays.

On $28 an hour for 2,080 hours, or $58,240, that difference is roughly $3,800 a year before other adjustments. A contract rate generally needs to be well above an employee's wage to come out ahead once taxes, benefits and unpaid time off are counted.

Pros and cons at a glance

Salary also tends to make budgeting easier, because the same amount arrives every payday. Hourly pay rewards extra effort directly, but a slow season or cut shifts can lower your income without warning.

Checklist for comparing two offers

1. Convert both to yearly pay using the hours you will actually work, including any overtime.
2. Subtract unpaid time off from the hourly offer if holidays or vacation are unpaid.
3. Add benefits, especially the employer's share of health insurance and any retirement match.
4. Check exempt status. Ask whether the salaried role is exempt or non-exempt from overtime.
5. Look beyond year one. Compare how raises work in each role. The Pay Raise Calculator shows how a raise changes your pay.

Frequently asked questions

Sources and how we calculated

Yearly figures use 52 weeks unless stated otherwise. Overtime is calculated at 1.5 times the regular rate for hours over 40 in a workweek, as required by the Fair Labor Standards Act for non-exempt employees. Exemption rules come from the U.S. Department of Labor's overtime pay guidance. Benefit cost figures come from the Bureau of Labor Statistics Employer Costs for Employee Compensation, June 2026.