Salary vs hourly: which pays more once you do the math

Salary versus hourly is mostly a question about hours. A salary looks bigger on paper because it's quoted as an annual number, but its real value depends on how many hours the job actually takes and on whether the law lets you be paid for overtime. A $60,000 salary at 40 hours a week works out to $28.85 an hour. The same salary at 50 hours a week is $23.08 an hour, and if the job is exempt from overtime, those extra 10 hours are free to your employer.

So the useful comparison is never "salary or hourly?" in the abstract. It's this specific salary, at the hours this job really runs, against that specific hourly rate, with overtime, unpaid holidays and slow weeks priced in. Do that and the answer is usually obvious.

Convert the salary to a true hourly rate

Payroll converts a salary to an hourly rate by dividing by 2,080 (40 hours x 52 weeks). That number is fine for comparing two 40-hour jobs and misleading for everything else. Divide by the hours you'll actually work instead. Ask current employees, not the recruiter, what a normal week looks like, and count the evening email and the weekend deploys.

The third column is the one people miss. An hourly job that pays time and a half after 40 hours catches up fast. At 50 hours a week, a nonexempt worker earns 40 hours at the base rate plus 10 hours at 1.5x, which is 55 hours' worth of pay. Divide the $60,000 salary's weekly value ($1,153.85) by 55 and you get $20.98. In other words, a $21 hourly job with overtime pays about the same as a $60,000 exempt salary when both run 50 hours a week.

Turn it around with a real offer. Say you're choosing between that $60,000 salaried role and a $25-an-hour job that also averages 50 hours. The hourly week pays $1,000 for the first 40 hours plus $375 for 10 overtime hours at $37.50, so $1,375. Over 50 paid weeks (two unpaid weeks off) that's $68,750, or $8,750 more than the salary. Run your own numbers in the hourly to salary calculator and the overtime calculator; the hours assumption moves the answer more than anything else.

The real dividing line is exempt vs nonexempt

"Salaried" and "hourly" describe how you're paid. "Exempt" and "nonexempt" describe whether the Fair Labor Standards Act requires overtime, and that's the distinction with money attached. Under the FLSA, a nonexempt employee gets 1.5 times the regular rate for every hour over 40 in a workweek. An exempt employee gets nothing extra, no matter how long the week runs.

Being on salary does not make you exempt. To be exempt under the white-collar rules in 29 CFR 541, a job generally has to pass three tests:

• Salary level: at least $684 a week, which is $35,568 a year. Nondiscretionary bonuses and commissions can count for up to 10% of that.
• Salary basis: a fixed amount each pay period that isn't cut because of the quality or quantity of the work.
• Duties: the primary duty has to be executive (managing a department and regularly directing at least two full-time employees), administrative (office work tied to running the business, with real discretion on matters of significance), or professional (work requiring advanced knowledge from prolonged specialized study, or genuinely creative work). Computer professionals and outside sales have their own tests.

Job titles don't count. The Department of Labor says so plainly: a "manager" who spends the day running a register and has no say in hiring is probably nonexempt, whatever the offer letter calls the role. Highly compensated employees earning at least $107,432 a year in total pay face a looser duties test, but still need the $684 weekly salary.

About that $684 figure: the Department of Labor's 2024 rule raised the threshold, but a federal court in Texas vacated it nationwide in November 2024, and it has not been revived. Employers are following the 2019 level. Several states set their own, much higher floors for 2026, including California ($70,304) and Washington ($80,168.40). If your state's line is higher, it wins.

There's also a middle category people forget: salaried nonexempt. You get a fixed salary but still earn overtime. Some employers use the "fluctuating workweek" method under 29 CFR 778.114, where the salary covers all hours at straight time and overtime hours earn only an extra half. On a $60,000 salary and a 50-hour week, the regular rate is $1,153.85 / 50 = $23.08, and the 10 overtime hours add $115.38, for $1,269.23. That's better than exempt, but well short of an hourly worker at the same base. If an offer says "salaried, nonexempt," ask which method they use.

What happens in a slow week or a busy one

This is where salary earns its reputation. An exempt employee must receive the full salary for any week in which they do any work, and the employer can't dock pay because there wasn't enough work to go around. If the warehouse is quiet or the client cancels, your paycheck doesn't notice. Deductions are allowed only in narrow cases, such as full days off for personal reasons, full sick days under a bona fide sick-pay plan, or unpaid disciplinary suspensions of a full day or more. The first and last weeks of a job can also be prorated.

Hourly pay has no such floor. Take an hourly worker earning $28.85, the 40-hour equivalent of $60,000. A 30-hour week pays $865.50 instead of $1,153.85, a $288.35 hit. If your industry has seasonal dips, or your employer trims shifts when sales soften, that volatility is a real cost, and it's worse for a household budget than the same annual total paid smoothly.

The busy week runs the other way. A salaried exempt worker who puts in 60 hours during a launch is paid exactly what they're paid for 40. The hourly worker earns 20 overtime hours at time and a half. Over a year, the question is which happens more at this employer: weeks that run short, or weeks that run long. In most salaried jobs it's the second, which is why the salary looks better in the offer than it does in December.

Holidays and paid time off

The FLSA doesn't require pay for time not worked, so holidays and vacation are whatever your employer's policy says. In practice salaried roles almost always include paid holidays and PTO, while hourly roles vary wildly: some match the salaried package, some pay holidays only after a waiting period, and many hourly jobs in retail, hospitality and staffing pay nothing for a day the business is closed.

Price that in. There are 11 federal holidays in 2026. If a $28.85-an-hour job pays none of them, that's 88 unpaid hours, or $2,538.80 a year. Two weeks of unpaid vacation is another 80 hours, or $2,308. Together that's about $4,800 that a salaried job paying the "same" $60,000 would hand you without any work. Use the PTO calculator to put a dollar figure on a specific leave policy before you compare offers, and check how many work hours 2026 actually has if your schedule isn't a standard 2,080.

One trap on the salaried side: an employer can deduct full-day absences from an exempt salary when you've run out of leave. Partial-day deductions are not allowed, so if they dock you for leaving three hours early, that's an improper deduction and worth raising.

Benefits follow full-time status more than pay type

Health insurance, retirement matches and disability coverage usually depend on full-time status, not on pay type. A full-time hourly employee at a large company often gets the same plan as the salaried staff. Under the Affordable Care Act, large employers have to offer coverage to employees averaging 30 hours a week, hourly or not. Where hourly roles lose out is part-time and variable-hour work: drop below the plan's hours requirement and the benefits go with it.

So don't assume. Ask for the benefits summary for the specific job, and compare the employer's share of the premium and the 401(k) match in dollars. A 4% match on $60,000 is $2,400 a year, which can erase most of the gap between two close offers.

The 2025-2028 overtime deduction tilts things toward hourly

From 2025 through 2028, nonexempt workers can deduct qualified overtime pay on their federal return, up to $12,500 a year ($25,000 on a joint return). The deduction phases out once modified adjusted gross income passes $150,000 ($300,000 joint). Only the premium counts: the "half" in time and a half that the FLSA requires, not the whole overtime paycheck. Exempt salaried workers get nothing from it, because the FLSA doesn't require them to be paid any overtime at all.

Two cautions. The deduction is claimed when you file, not withheld from each paycheck by default, so your take-home pay during the year won't show it unless you adjust your W-4. And overtime above what federal law requires, such as daily overtime under a state law or a union contract, doesn't count as qualified. It's a nice bonus for nonexempt workers, worth hundreds of dollars a year to a worker with steady overtime, but it shouldn't decide a job on its own.

Which is better, case by case

Hourly wins when the work runs long and the job is nonexempt. Every hour past 40 is paid at a premium, the new deduction trims the tax on that premium through 2028, and you're never working for free. It also wins when the hourly rate is close to the salary's 40-hour equivalent and the employer pays holidays and PTO, which removes salary's main advantage.

Salary wins when the hours genuinely stay near 40, when the work is seasonal or the employer cuts shifts, and when the salaried package includes paid leave the hourly job doesn't. Stability has value, especially if you have a mortgage or a single income. Salaried roles also tend to sit on the track toward management pay, which matters more over a decade than a few thousand dollars this year.

The common mistake is accepting a salary that's quoted at a 40-hour equivalent for a job everybody knows runs 50 or 55. If you're asked to switch from hourly to salaried, ask what hours the role expects, check that the salary clears the exempt threshold and the duties tests honestly, and divide. If the salary divided by your real hours comes out below your current rate, the "promotion" is a pay cut. Counter with a number based on your real hours, or ask to stay nonexempt. Our calculation method shows exactly how we convert between the two.

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