I’m sure there are many people that ask themselves if they are getting paid enough. It would be rare for someone to say that they felt that they didn’t need more pay. But, how much is your time and effort worth? If you get paid hourly wages, you can get extra money for working longer hours. If you work at a job that pays a salary, you may be required to work many late nights, or put in extra effort without an increase in pay. There are a lot of jobs out there that are very similar in function, but they may pay either a salary, or hourly wages. What is worth more?
First, there must be some assumptions. Most of the time, the total compensation at a job can include benefits other than just pay. There are things like insurance, vacations, sick days, etc. Those are definitely factors that can make a difference on how well someone feels they are being compensated. But, if all of those factors are fairly equal in the level of compensation, it is pretty easy to determine what method of earnings would be better.
To calculate the yearly income of most people earning a salary, it is fairly straight forward. The yearly salary is generally a set amount of money that a person earns in a year, usually taken in monthly, bi-monthly, or weekly increments. This yearly amount doesn’t change whether a person puts in extra hours, or fewer hours. Of course there is a job function that needs to be done and if a person isn’t putting in the necessary time to accomplish their tasks, they could soon be earning $0 for a yearly salary.
Now a typical hourly wage job is based on a rate of pay, like dollars per hour. The amount that someone could earn in a year is going to be affected by their pay rate and the amount of hours that they work in a year. Another factor that enters into the equation is overtime pay. In the U.S., a normal work week is 40 hours. Every hour that is worked in addition to 40 hours is considered overtime and the pay rate for those extra hours is 150% of your normal pay rate. Typically it’s called “time and a half”.
So now that you have a better idea of both pay practices, we can compare them to see which is better for a given situation. Of course, this is not taking into account other compensation benefits.
Here is an example: A paralegal is paid $18.50/hour in hourly wages, and is working for a new lawyer that is paid $65,000 in annual salary. They spend a year working the same amount of long hours to prepare for a high profile case. If they are at the office 12 hours/day, 5 days/week, 50 weeks a year, how does their pay compensation compare?
Since the lawyer is on a salary, we know that the lawyer’s yearly compensation is $65,000, no matter how many hours are worked. The paralegal is paid hourly, and the total yearly compensation will be calculated from the pay rate, normal hours worked per week, hours of overtime worked per week, and how many weeks worked in a year.
A helpful tool to calculate this is an Hourly Wage Earnings Calculator.
After we finish with the math, we learn that the paralegal earned a total of $64,750 for that year. This is very comparable to the total salary earnings of the lawyer at $65,000.
This is only an example, but it may give some insight into what is worth more when it comes to a new job, or a career path.
For other financial calculators that can help with money matters, follow this link: Financial Calculators. Good Luck!