How to comparison calculate between a yearly salary rate and a contract hourly salary rate

You just received two job offers. One is a consulting job from an online poker company, and the other is a salary job in Las Vegas. Which one pays better? How do you figure it out?
In this article, we will look at salary comparisons for the United States.

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Due to tax and standards in other countries what is said in this article may or may not apply to other countries.

What is included in a typical salary job?

Salary pay is more than just a salary. It also includes benefits. Here is a list of the typical benefits that one gets in a general salary position.

  • Base salary – for example $60k per year
  • Health Insurance
  • Dental Insurance
  • Life Insurance
  • Short Term Disability Insurance
  • Long Term Disability Insurance
  • Unemployment tax (usually paid for by the employer)
  • Employer’s part of FICA (social security)
  • Paid Holidays (9 days)
  • Personal Days (2 days)
  • Paid Vacation (5 days)
  • Sick Days (5 days)

But when an “employee” is hired as an hourly contract worker they are not paid all of these benefits. In some cases, a contract worker is paid higher than a salaried employee’s hourly wage, but in other cases, a contract worker is not paid higher or maybe not be hired enough.

How to convert a contract hourly pay to a salary figure

Don’t let yourself get scammed by a potential employer. Learn how to convert a job offer from an hourly wage into a salary wage, so you can really see if that “higher” contract paid job is really a better paying job.

When I am trying to do these calculations I start with a salary figure that I believe my skills are worth and then calculate what the compatible contract hourly wage should be.

Base Salary

Let’s start with a base salary of $60k. If we only looked at this figure and calculated an hourly wage, the hourly wage would be:

  • Hourly Wage = salary_yearly_pay / (months_in_the_Year * avg_work_days_in_month * avg_hours_per_day)
  • salary_yearly_pay = $60,000
  • months_in_the_year = 12
  • avg_work_days_in_month = 20
  • avg_hours_per_day = 8
  • Hourly wage = 60,000 / (12*20*8) = $31.25

The value $31.25 would not be a correct value, because it is only looking at one piece of the equation. The problem is that the $60,000 value is not a true representation of what your hourly wage is.

So let’s fix that figure for a person living in NJ.

  • Health insurance for a family of 4 = $19,140/year
  • Dental insurance for a family of 4 = $445/year
  • Term Life insurance for $150k for an employee, male age 40 = $288/year
  • Short Term Disability Insurance (1 – 3% of salary) = $1200/year
  • Long Term Disability Insurance (1 – 3% of salary) = $1200/year
  • NJ Workforce Development Partnership Fund tax (.000425 of $34,400 ) = $14.62/year
  • NJ Unemployment insurance (.003825 of $34,400 ) = $131.58/year
  • NJ Family Leave Tax (.0008) = $48/year
  • Federal Unemployement Tax (.006 of $7000) = $42/year
  • FICA (social Security) Employer’s part (6.2%) = $3720/year
  • Medicare FICA (1.45%) = $870/year

The total for these amounts that an employer generally takes care of is $27099.
Paid days off are 21 days.
So our final calculations will be the following:

Hourly Wage = (salary_yearly_pay + benefits_value) /
((months_in_the_Year * avg_work_days_in_month) – days_off) * avg_hours_per_day)
total_pay = salary_yearly_pay + benefits_value = 60,000 + 27099 = 87099
days_worked = ((months_in_the_Year * avg_work_days_in_month) – days_off) = 12 * 20 – 21 = 219
hours_worked = days_worked * 8 = 219 * 8 = 1752
Actual Hourly wage = total_pay / hours_worked = 87099 / 1752 = $49.71


When taking into account everything that goes into a salary, a salaried job paying $60,000/year is equivalent to a contract hourly wage of $49.71, not $31.25 that is from a straight conversion.

But then this does not take into account other factors. Ability to work at home. Ability to be flexible with your hours. No worries about if your child suddenly becomes sick. Those are things that can not be defined with a dollar value.

On the other hand, it does not give an employer the right to pay a woman who values those items in a job the right to pay the woman lower wages. It is a nontangible job benefit that is no different than another employer that gives free gym membership to their employees or sponsors an employee softball team. It can be classified as worker morale or worker happiness.

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