Hourly Pay, Salary and Pay Periods Explained

Pay can be quoted by the hour, the week, the month or the year, and paid on several different schedules. This guide explains how those figures connect: how to convert hourly pay to a salary and back, what each pay period means, why gross pay and take-home pay differ, how overtime can change the picture, and how to compare offers fairly.

The worked examples use round, illustrative amounts in US dollars. They are not typical or recommended wages. The arithmetic works the same in any currency, but pay schedules, deductions and overtime rules vary by employer and by country, so always check what applies to you.

Hourly pay and salary: the basics

There are two common ways to describe what a job pays:

• Hourly pay is a rate for each hour you work. What you earn in a week depends on how many hours you’re paid for.
• A salary is a fixed amount for a period, usually quoted per year, and paid in equal parts on each payday. It normally stays the same from one payday to the next, whether the week was busy or quiet.

Both are usually quoted as gross pay, the amount before tax and other deductions, and the figures in this guide are gross figures too. The pay period is the stretch of time each payment covers, such as a week, two weeks or a month.

How often people are paid isn’t the same everywhere. Weekly and bi-weekly pay are common for hourly work in some countries; monthly pay is the norm for most jobs in many others. Your contract or offer letter should say which schedule your employer uses.

Converting between hourly pay and salary

Every conversion comes down to one idea: the number of paid hours in a year. Once you know it, you can go in either direction.

• Yearly pay = hourly rate × paid hours per week × paid weeks per year
• Hourly rate = yearly pay ÷ (paid hours per week × paid weeks per year)

A full-time week of 40 hours, paid for all 52 weeks of the year, gives 40 × 52 = 2,080 paid hours. That’s where the common shortcut comes from: multiply an hourly rate by about 2,000 for a rough yearly figure, or divide a salary by about 2,000 for a rough hourly one. The shortcut only holds if you really are paid for about 40 hours a week, every week.

Worked example: from salary to hourly

Take an illustrative salary of $50,000 a year, for a 40-hour week with 52 paid weeks:

• Paid hours: 40 × 52 = 2,080
• Hourly rate: $50,000 ÷ 2,080 = $24.04
• Daily rate, for five 8-hour days a week: $50,000 ÷ 260 working days = $192.31

And the other way round: an illustrative $20 an hour for 40 hours a week over 52 weeks is $20 × 40 × 52 = $41,600 a year.

Unpaid weeks change the hourly figure

The 52-week assumption fits a job where every week is paid, including holidays. Paid holiday still counts as a paid week. In the UK, for example, GOV.UK explains that almost all workers are entitled to 5.6 weeks’ paid holiday a year, and those weeks are paid like working weeks.

Unpaid time is different. If you take unpaid leave, work on a fixed-term or seasonal contract, or are only paid during part of the year, the same yearly amount is spread over fewer paid hours. With the same $50,000 and 40-hour weeks but only 48 paid weeks:

• Paid hours: 40 × 48 = 1,920
• Hourly rate: $50,000 ÷ 1,920 = $26.04

The yearly pay hasn’t changed, but the effective hourly rate is higher, because you work fewer hours for it. Going the other way, if you’re paid by the hour, unpaid weeks lower your yearly total, since there’s no pay for the hours you don’t work.

Employers don’t all use the same hours

Some employers convert salaries with a fixed number of hours set by their own rules. US federal agencies are one example: the Office of Personnel Management (OPM) explains that most federal civilian employees’ hourly rates are worked out by dividing annual pay by 2,087 hours, not 2,080. With that divisor, the same $50,000 works out at $23.96 an hour.

Neither number is wrong. They’re different conventions. If your employer’s hourly figure doesn’t match yours, ask which hours and weeks it uses.

Pay periods: weekly, bi-weekly, semi-monthly and monthly

A pay period tells you how often you’re paid and what each payment covers. For a fixed salary, the pay for each payday is simply the yearly amount divided by the number of paydays. Here is the illustrative $50,000 salary, with 52 paid weeks, on the four common schedules:

Figures calculated with the same maths as the Biberks Pay Calculator: gross pay, 40-hour weeks, 52 paid weeks, rounded to the cent. Real paychecks can differ by a few cents because of rounding.

All four rows add up to the same $50,000 over the year. Only the size and timing of each payment change.

Bi-weekly vs semi-monthly

These two are easy to mix up because both pay roughly twice a month, but they work differently:

• Bi-weekly pay arrives every two weeks, on the same day of the week. That’s usually 26 paydays a year, so most months have two paydays and two months each year have three.
• Semi-monthly pay arrives on two set dates each month, such as the 15th and the last day. That’s always 24 paydays a year, so the payday can fall on any day of the week.

Because there are fewer paydays, each semi-monthly payment is larger: $2,083.33 against $1,923.08 bi-weekly in the example above. Neither schedule pays more over a year. If you budget by the month, though, the difference matters: with bi-weekly pay, a month with two paydays brings in $3,846.15, not $4,166.67.

The calendar adds one more wrinkle. A year is 52 weeks and one day, or two days in a leap year, so the spare days slowly add up. Every so often, roughly once every 11 years, a bi-weekly schedule has 27 paydays in a calendar year instead of 26. Employers handle this in different ways: some keep each payment the same, so that year’s total is higher, and some divide the yearly salary by 27 instead. If it affects you, your payroll team can tell you which applies.

Why monthly pay isn’t four weekly payments

A month is longer than four weeks. With 52 weeks and 12 months in a year, a month averages 52 ÷ 12 ≈ 4.33 weeks. So four weekly payments of $961.54 come to $3,846.15, while one monthly payment of the same salary is $4,166.67. When you compare a monthly figure with a weekly one, multiply the weekly amount by 52 and divide by 12, rather than multiplying by four.

Gross pay vs take-home pay

Every figure so far is gross pay: the amount before anything is taken out. The amount that actually reaches your bank account is take-home pay, also called net pay. The difference is made up of deductions, which can include:

• income tax
• social security or national insurance contributions
• pension or retirement plan contributions
• health insurance or other benefit contributions
• other amounts, such as student loan repayments or union fees, where they apply

Which of these apply, and how much each one is, depends on the country, and sometimes the state or region, you’re taxed in, on your personal circumstances, and on your employer’s pay and benefits arrangements. No single percentage turns gross pay into take-home pay for everyone, so this guide doesn’t give one.

Your payslip, or pay stub, is the best record of what’s actually deducted: it normally shows the gross pay for the period, each deduction and the net amount. If you want a rough take-home estimate before you have a payslip, the UK Salary Calculator and the USA Salary Calculator give a simplified estimate. Treat the result as a guide, and check its notes on what it includes.

Overtime: why the rules differ

Overtime usually means hours worked beyond your normal hours. Whether it’s paid, and at what rate, is not the same everywhere. It depends on the law where you work, the kind of job you do, and your contract or any collective agreement. Two examples show how far the rules can differ.

United States: the federal rule

In the US, the federal overtime rules are in the Fair Labor Standards Act (FLSA). The US Department of Labor explains that, unless exempt, covered employees must receive overtime pay for hours worked over 40 in a workweek, at not less than one and a half times their regular rate of pay. The same page notes that:

• the rule works on a workweek basis, a fixed, recurring period of seven days, and hours can’t be averaged over two or more weeks;
• federal law doesn’t require extra pay for working on weekends or holidays as such, unless those hours are overtime;
• some employees are exempt and aren’t covered by the overtime rule.

Averaging matters for bi-weekly pay. A two-week pay period might include one 45-hour week and one 35-hour week: 80 hours in total, but the first week still has 5 overtime hours under the federal rule.

As an illustrative example, a covered, non-exempt worker paid $20 an hour who works 45 hours in one workweek would earn at least:

• 40 regular hours × $20 = $800.00
• 5 overtime hours × $30 (1.5 × $20) = $150.00
• Total for the week: $950.00

The regular rate used for overtime can include more than the basic hourly rate, and other rules can apply alongside the federal one, so treat this as an illustration of the arithmetic, not a statement of what you’re owed.

United Kingdom: set by the contract

In the UK there is no general legal right to extra pay for overtime. GOV.UK explains that employers do not have to pay workers for overtime, but a worker’s average pay for the total hours worked must not fall below the National Minimum Wage. Whether overtime is paid, and at what rate, is usually set out in the employment contract.

Elsewhere

Other countries have their own rules, so check with the labour ministry or employment agency where you work, and read your contract. Either way, the conversions in this guide use your normal paid hours. Paid overtime raises your yearly total; unpaid extra hours on a salary lower your effective hourly rate.

Comparing pay and job offers

When two jobs quote pay in different ways, convert both to the same basis before comparing them. Yearly gross pay and effective hourly pay together give the clearest picture.

Here are two illustrative offers:

Offer B pays more per hour but less over the year, because it has fewer paid hours. Which is better depends on what you value: more income, or more time. The numbers don’t make that choice, but they make it clear.

A fair comparison also looks beyond the headline rate:

• Paid and unpaid time: how many weeks are paid, including holidays.
• Hours: the normal hours, and whether extra hours are paid.
• Pay schedule: it doesn’t change the yearly total, but it affects your monthly budget.
• Benefits and deductions: pension contributions, health cover and other benefits can be worth a lot, and they vary between employers.

Offers in different currencies

If two offers are in different currencies, put them on the same basis first, as above, and only then convert one into the other’s currency. Keep in mind that:

• exchange rates change, so a comparison is only as current as the rate you use, and banks and transfer services may use different rates or add fees;
• living costs, taxes and benefits differ between countries, so a higher converted figure isn’t automatically a better offer.

The Salary Converter and the Currency Converter can give you a quick conversion, but their rates are approximate. Check a current rate from your bank or another source you trust before you rely on a converted figure.

Checking the numbers yourself

You can try every example in this guide with Biberks tools that run in your browser:

• Convert an hourly rate or salary into hourly, daily, weekly, bi-weekly, semi-monthly and monthly pay with the Pay Calculator. Enter $50,000 a year, 40 hours a week and 52 paid weeks to see the table above, then change the paid weeks to 48 to see the hourly rate rise to $26.04.
• Compare a salary in another currency with the Salary Converter, keeping in mind that its rates are approximate.

If you’re working out loan or mortgage payments against your pay, how loan and mortgage payments are calculated explains that side of the budget. And if you’d like to know what happens to the figures you type into these tools, how Biberks tools handle your data explains which tools work entirely in your browser.

The results are estimates based on what you enter. They aren’t payroll figures, tax advice or financial advice. Your employer’s payroll, your contract and your payslip are the final word on what you’re paid.