Salary Calculator: Formula, Examples, and How It Works

A salary calculator converts pay between common time bases—hourly, daily, weekly, biweekly, monthly, and annual—using a consistent set of assumptions (hours per day, days per week, weeks per year, paid vs unpaid breaks, paid time off, and overtime rules). The goal is not just to “do the math,” but to standardize inputs so different compensation structures can be compared accurately.

This guide explains the core formulas a salary calculator uses, shows practical examples, and highlights the assumptions that most often change results.

What a Salary Calculator Does

A salary calculator typically supports these conversions:

Hourly → annual / monthly / weekly
Annual salary → hourly / daily / monthly
Weekly or biweekly pay → annual
Monthly pay → annual
Annual compensation → effective hourly rate (including bonuses, overtime, or allowances)

It may also account for:

Overtime (e.g., 1.5× after 40 hours/week)
Unpaid breaks (30–60 minutes/day)
Unpaid time off (unpaid leave, seasonal work)
Paid time off (vacation/holidays included in salary)
Shift differentials (night shift premiums)
Bonuses and commissions
Deductions (tax, benefits) to estimate net pay (this is technically a pay calculator, but many tools include it)

A strong salary calculator always makes assumptions explicit. Two people can input the same hourly rate and get different annual results simply because one assumes 37.5 hours/week and another assumes 40 hours/week. Also, Read – Loan Calculator: Formula, Examples, and How It Works

Key Inputs and Definitions

Before formulas, define the variables a typical calculator uses:

hourly_rate = pay per hour
hours_per_week = paid working hours per week (often 40)
hours_per_day = paid working hours per day (often 8)
days_per_week = working days per week (often 5)
weeks_per_year = 52 (some calculators use 52.1429)
paid_weeks_per_year = weeks actually paid (52 if fully salaried, less if seasonal/unpaid)
monthly_periods = 12
daily_rate = pay per day
weekly_pay = pay per week
biweekly_pay = pay per 2 weeks
monthly_pay = pay per month
annual_salary = pay per year
overtime_multiplier = e.g., 1.5
overtime_hours_per_week = weekly overtime hours (if any)
bonus_annual = annual bonus amount (if any)

Core Salary Calculator Formulas

Below are the common conversion formulas used in salary calculators. (Formulas are shown in code formatting so they can be implemented directly.)

1) Hourly to Weekly, Monthly, and Annual

Hourly → Weekly

weekly_pay = hourly_rate * hours_per_week

Hourly → Annual

annual_pay = hourly_rate * hours_per_week * weeks_per_year

Hourly → Monthly (from annual)

monthly_pay = annual_pay / 12

Some calculators also compute monthly directly:

monthly_pay = hourly_rate * hours_per_week * weeks_per_year / 12

2) Annual Salary to Hourly, Weekly, and Monthly

Annual → Monthly

monthly_pay = annual_salary / 12

Annual → Weekly

weekly_pay = annual_salary / weeks_per_year

Annual → Hourly

hourly_rate = annual_salary / (hours_per_week * weeks_per_year)

If the workweek is 37.5 hours instead of 40, the hourly rate increases:

hourly_rate = annual_salary / (37.5 * weeks_per_year)

3) Daily Rate Conversions

Daily → Weekly

weekly_pay = daily_rate * days_per_week

Daily → Annual

annual_pay = daily_rate * days_per_week * weeks_per_year

Annual → Daily

daily_rate = annual_salary / (days_per_week * weeks_per_year)

4) Weekly / Biweekly / Monthly to Annual

Weekly → Annual

annual_pay = weekly_pay * weeks_per_year

Biweekly → Annual

annual_pay = biweekly_pay * 26

Monthly → Annual

annual_pay = monthly_pay * 12

Note: Some employers pay semimonthly (24 pay periods/year), which is not the same as biweekly (26).

5) Semimonthly vs Biweekly (Common Source of Confusion)

Semimonthly = 2 paychecks/month = 24 paychecks/year
Biweekly = every 2 weeks = 26 paychecks/year

If you know pay per paycheck:

Semimonthly paycheck → Annual

annual_pay = paycheck_amount * 24

Biweekly paycheck → Annual

annual_pay = paycheck_amount * 26

The same paycheck amount yields different annual totals depending on schedule.

Overtime: How Salary Calculators Handle It

Overtime can be modeled for hourly employees (and sometimes for salaried non-exempt roles). The simplest model assumes overtime triggers after a weekly threshold.

1) Overtime weekly earnings

regular_hours = min(hours_per_week, overtime_threshold_hours)
overtime_hours = max(0, hours_per_week - overtime_threshold_hours)

weekly_pay = (regular_hours * hourly_rate) + (overtime_hours * hourly_rate * overtime_multiplier)

2) Annualizing overtime

annual_pay = weekly_pay * weeks_per_year

If overtime varies, calculators often let users input an average overtime hours/week.

Paid Time Off and Unpaid Time Off

A salary calculator should distinguish between:

Paid time off (PTO): you are paid even when not working (common in salaried roles).
Unpaid time off: reduces paid hours or paid weeks.

1) Hourly with unpaid time off (reduce paid weeks)

If you’re hourly and not paid for time off, a more realistic annual calculation reduces the number of paid weeks:

paid_weeks_per_year = weeks_per_year - unpaid_weeks_off
annual_pay = hourly_rate * hours_per_week * paid_weeks_per_year

2) Hourly with unpaid days off (reduce hours)

annual_paid_hours = (weeks_per_year * hours_per_week) - (unpaid_days_off * hours_per_day)
annual_pay = hourly_rate * annual_paid_hours

3) Salaried with PTO

For salaried employees, PTO typically does not change annual salary:

annual_pay = annual_salary

But PTO does affect the “effective hourly rate” if you compute hourly based on actual worked hours. Many calculators do not do this by default; better ones offer an “effective rate” toggle. Also, Read – Payment Amounts: How They Work, How to Calculate Them

Effective Hourly Rate: The Most Useful Output

People often want to know: “What is this compensation worth per hour in reality?”

1) Salaried effective hourly rate

If you work more than standard hours, your effective hourly rate declines:

effective_hourly = annual_salary / (actual_hours_per_week * weeks_per_year)

2) Include bonus/commission

annual_total_comp = annual_salary + bonus_annual
effective_hourly = annual_total_comp / (actual_hours_per_week * weeks_per_year)

3) Include unpaid commute time (optional model)

Some calculators let users treat commute time as “work-related time”:

effective_hourly = annual_total_comp / ((actual_hours_per_week + commute_hours_per_week) * weeks_per_year)

This is not payroll math, but it is useful for comparing job offers.

Worked Examples

These examples show how assumptions change outcomes.

Example 1: Hourly to Annual (Standard Full-Time)

Inputs

Hourly rate: 25
Hours per week: 40
Weeks per year: 52

Weekly pay

weekly_pay = 25 * 40 = 1000

Annual pay

annual_pay = 25 * 40 * 52 = 52000

Monthly pay

monthly_pay = 52000 / 12 = 4333.33

Result

Weekly: 1,000
Monthly: 4,333.33
Annual: 52,000

Example 2: Annual Salary to Hourly (37.5 vs 40-hour week)

Inputs

Annual salary: 60,000
Weeks per year: 52

Hourly at 40 hours/week

hourly_rate = 60000 / (40 * 52)
hourly_rate = 60000 / 2080 = 28.846...

Hourly at 37.5 hours/week

hourly_rate = 60000 / (37.5 * 52)
hourly_rate = 60000 / 1950 = 30.769...

Result

40h/week assumption: ~28.85/hour
37.5h/week assumption: ~30.77/hour

Same salary, different implied hourly value.

Example 3: Biweekly vs Semimonthly Paycheck

Inputs

Paycheck amount: 2,000

Biweekly (26 paychecks)

annual_pay = 2000 * 26 = 52000

Semimonthly (24 paychecks)

annual_pay = 2000 * 24 = 48000

Result

Biweekly annual: 52,000
Semimonthly annual: 48,000

Example 4: Overtime Pay (Time-and-a-Half)

Inputs

Hourly rate: 20
Total hours/week: 50
Overtime threshold: 40
Overtime multiplier: 1.5

regular_hours = 40
overtime_hours = 10

weekly_pay = (40 * 20) + (10 * 20 * 1.5)
weekly_pay = 800 + 300 = 1100

Annualized:

annual_pay = 1100 * 52 = 57200

Result

Weekly: 1,100
Annual: 57,200

If you ignored overtime and multiplied 20 × 50 × 52 you’d get 52,000, which underestimates earnings.

Example 5: Hourly Worker With Unpaid Time Off

Inputs

Hourly rate: 30
Hours/week: 40
Unpaid weeks off: 4 (seasonal or unpaid leave)
Weeks/year: 52

paid_weeks_per_year = 52 - 4 = 48
annual_pay = 30 * 40 * 48 = 57600

If you assumed 52 paid weeks:

annual_pay = 30 * 40 * 52 = 62400

Result

With 4 unpaid weeks: 57,600
With full year paid: 62,400

Example 6: Effective Hourly Rate for a Salaried Role With Long Hours

Inputs

Annual salary: 90,000
Actual hours/week: 50
Weeks/year: 52

effective_hourly = 90000 / (50 * 52)
effective_hourly = 90000 / 2600 = 34.615...

If you assumed 40 hours/week:

effective_hourly = 90000 / 2080 = 43.269...

Result

Effective at 50h/week: ~34.62/hour
Implied at 40h/week: ~43.27/hour

This is why a calculator that includes “actual hours worked” is more decision-useful.

How Salary Calculators “Decide” Hours per Year

The common baseline is:

hours_per_year = hours_per_week * weeks_per_year

With 40 hours/week and 52 weeks/year:

hours_per_year = 40 * 52 = 2080

Some calculators use 52.1429 weeks/year (365/7) to align with a true year length:

hours_per_year = 40 * 52.1429 = 2085.716

Both are defensible; the difference is small but noticeable at scale. High-quality calculators disclose which they use.

Common Assumptions That Change Results

A salary calculator is only as accurate as its assumptions. The most impactful are:

Hours per week (37.5 vs 40 vs 45+)
Paid vs unpaid breaks
Unpaid lunch reduces paid hours even if you are “at work.”
Pay periods (biweekly vs semimonthly)
PTO treatment
Salaried pay usually includes PTO; hourly may not.
Overtime rules
Thresholds and multipliers vary by policy and role classification.
Bonuses and allowances
Fixed bonuses are easy; performance bonuses should be estimated conservatively.
Part-time schedules
Annualizing part-time requires accurate paid weeks and consistent weekly hours.

Practical Tips for Using a Salary Calculator Correctly

Start from what you know for sure. If you only know hourly and typical weekly hours, compute weekly first, then annual.
Match the pay schedule. Use biweekly only if you are paid every two weeks; use semimonthly only if you’re paid twice per month.
For job comparisons, use effective hourly. Annual salary alone hides workload differences.
Separate gross vs net. A salary calculator typically gives gross pay; deductions require a separate module or inputs.
Document assumptions in the output. The most trustworthy calculators show: hours/week, weeks/year, pay periods/year.

Salary Calculator FAQs

What is the standard formula for converting hourly pay to annual salary?

Most calculators use:

annual_pay = hourly_rate * hours_per_week * 52

If you work fewer paid weeks (unpaid leave/seasonal work), replace 52 with paid weeks.

Why does my annual salary look different between calculators?

Usually because of different assumptions for:

hours/week (37.5 vs 40)
weeks/year (52 vs 52.1429)
paid breaks and unpaid lunch
pay schedule (biweekly vs semimonthly)

How do I convert annual salary to hourly pay?

Use:

hourly_rate = annual_salary / (hours_per_week * 52)

Use your actual weekly hours if you want an effective hourly rate.

Is biweekly the same as twice a month?

No. Biweekly is 26 paychecks/year; twice a month is 24 paychecks/year. The annual totals differ if the paycheck amount is the same.

How do bonuses affect hourly rate?

Include bonuses in total annual compensation:

effective_hourly = (annual_salary + bonus_annual) / (hours_per_week * 52)

If your hours vary, use actual hours/week.

Should I include overtime in annual calculations?

If overtime is consistent or predictable, yes. Use:

weekly_pay = (regular_hours * hourly_rate) + (overtime_hours * hourly_rate * overtime_multiplier)
annual_pay = weekly_pay * 52

How do I calculate pay if I work part-time?

Use your part-time hours/week:

annual_pay = hourly_rate * part_time_hours_per_week * paid_weeks_per_year

Summary: How It Works

A salary calculator is a structured conversion engine. It takes a pay rate (hourly, weekly, monthly, or annual), applies standardized time assumptions (hours/week, weeks/year, pay periods), optionally layers on overtime and bonuses, and produces comparable outputs across time bases. Also, Read – Salary Conversions Explained: Hourly to Annual (Examples, Tables, & Unpaid Time Adjustments)