An hourly wage is a fixed rate of pay you earn for each hour you work. If your rate is $20 per hour and you work 30 hours in a week, your gross pay for that week is $600. Unlike a salary, where you receive the same paycheck regardless of hours, an hourly wage ties your earnings directly to the time you put in. Most workers in the United States are paid hourly, and the arrangement comes with specific legal protections around overtime and minimum pay.
How Hourly Pay Is Calculated
The math is straightforward: multiply your hourly rate by the number of hours you work. To figure out what an hourly job pays over a full year, multiply the hourly rate by your weekly hours, then multiply that by 52 weeks. Someone earning $25 per hour who works 40 hours a week makes $25 x 40 x 52 = $52,000 per year before taxes.
Going the other direction is just as simple. If a job listing quotes an annual figure and you want to know the hourly equivalent, divide the annual pay by the total hours worked in a year. For a standard 40-hour workweek, that’s 2,080 hours (40 x 52). A $50,000 annual salary works out to about $24.04 per hour.
Keep in mind that these conversions assume you work every week of the year. If you take unpaid time off, your actual annual earnings will be lower than the calculated figure.
The Federal Minimum Wage
Federal law sets a floor for hourly pay. The current federal minimum wage is $7.25 per hour, a rate that has held since 2009. Many states and localities have set their own minimums well above the federal level, and when that happens, employers must pay whichever rate is higher. If you work in a state with a $15 minimum wage, that’s the rate that applies to you, not the $7.25 federal floor.
Tipped workers, such as restaurant servers, are subject to a separate, lower minimum cash wage under federal law. Employers can pay tipped employees less per hour as long as tips bring total earnings up to at least the standard minimum wage. If tips fall short, the employer must make up the difference.
Overtime Pay for Hourly Workers
One of the biggest financial protections for hourly workers is overtime pay. Under the Fair Labor Standards Act (FLSA), employers must pay at least one and a half times your regular hourly rate for every hour you work beyond 40 in a single workweek. If your normal rate is $20 per hour, each overtime hour pays $30.
A few details matter here. Overtime is calculated on a workweek basis, defined as any fixed period of 168 consecutive hours (seven 24-hour days). Your employer can’t average your hours across two weeks to avoid paying overtime. If you work 50 hours one week and 30 the next, you’re owed 10 hours of overtime pay for that first week, even though you averaged 40.
Federal law also doesn’t require extra pay simply because you work on a weekend or holiday. Overtime kicks in only when your total hours for the workweek exceed 40, regardless of which days you worked. Some employers do offer premium pay for holidays or weekends, but that’s a company policy, not a legal requirement.
Hourly vs. Salaried: Key Differences
The distinction between hourly and salaried pay isn’t just about how your paycheck is calculated. It determines whether you’re entitled to overtime protection. In employment law, the terms that matter are “non-exempt” and “exempt.” Non-exempt workers, the vast majority of hourly employees, must receive at least the minimum wage for every hour worked and overtime pay past 40 hours. Exempt workers receive a set salary and are not entitled to overtime, no matter how many hours they put in.
To qualify as exempt, an employee generally must meet three tests. First, they must be paid a salary rather than an hourly rate. Second, that salary must meet a minimum threshold set by the FLSA. Third, their job duties must involve executive, administrative, or professional responsibilities, such as managing other employees, making independent business decisions, or performing work that requires specialized education.
If you’re paid hourly, you’re almost certainly non-exempt and entitled to overtime. Some salaried workers who earn below the federal salary threshold or whose duties don’t meet the exemption criteria are also non-exempt, meaning they get overtime too.
Benefits and Paid Time Off
No federal law requires employers to provide paid vacation, sick leave, or holidays to hourly workers. Whether you get these benefits depends on your employer’s policies and, in some cases, your state or local laws. A growing number of states and cities have enacted paid sick leave requirements, but the specifics (how many hours you accrue, when you become eligible, which employers are covered) vary widely.
This is one area where hourly workers often face a real gap compared to salaried employees. Many full-time salaried positions come with a benefits package that includes paid time off, health insurance, and retirement contributions. Hourly workers may receive some or all of these benefits, especially in full-time roles, but part-time hourly positions frequently offer fewer perks. When evaluating an hourly job, factor in whether it includes benefits, because a higher hourly rate with no health insurance or paid leave may be worth less in practice than a slightly lower rate with a full benefits package.
Converting Your Pay for Comparison
If you’re comparing an hourly job offer to a salaried one, converting both to the same unit makes the decision clearer. Use the formulas above: multiply hourly rate by 2,080 to get an annual figure, or divide annual salary by 2,080 to get an hourly equivalent.
But raw numbers don’t tell the whole story. An hourly position at $28 per hour with regular overtime could easily outpace a $60,000 salary. If you consistently work 45 hours a week at $28, your five weekly overtime hours pay $42 each, bringing your weekly gross to $1,330. Over 52 weeks, that’s $69,160, well above the salaried offer. On the other hand, if hours get cut during slow periods, your actual annual pay drops. Hourly work gives you upside when demand is high and risk when it’s low, while a salary gives you predictability.