If you’re planning on quitting your job or think you might be let go on a specific date, you’ll probably want to know how much your last paycheck will be. You can do this if you know what your daily pay rate is.
If you want to take a temporary sabbatical from work and need to know what kind of financial hit you’ll take, you can also use your daily pay rate to figure that out. Without doing complex tax and deduction calculations, you can still come up with a good ballpark that will help you plan your personal finances as you begin your transition.
Salary vs. Wages
Some people interchange the words “salary” and “pay,” with the former being a set amount and the latter word referring to wages. A salary is a fixed annual pay amount you and your employer agree on. Wages are earned hourly. You might be paid a project rate or by piece, article or other task.
A salary often comes with benefits, such as paid vacation, health insurance, retirement account contribution and other benefits. It's relatively easy to calculate a daily pay rate from annual salary.
Read More: How to Annualize a Salary
Calculate Your Number of Days Paid
The number of days you work isn’t always the same as the number of days you get paid. This happens when you get paid time off or a paid vacation. For example, let’s say you work five days per week and your employment lasts all year. If you multiply 5 X 52 you get 260 days.
If you get two weeks of vacation time, you only work 250 days. If you get paid vacation, you still get your full salary. As you calculate your daily pay rate, decide if you want to divide your salary by 250 days or 260 days.
Read More: What Formula to Use to Calculate Annual Salary?
Calculate Daily Rate From Annual Salary
If you make $60,000 per year and have decided that you want to calculate your daily pay rate for just the days you actually work (for example, 250), you’d divide $60,000 by 250. Your daily pay rate is $240.
That’s not a helpful number, though, if you're trying to estimate what your final paycheck will be if you quit or will be let go. That paycheck will probably be calculated by a full 260-day work schedule because you’re paid for your vacation days. Using that calculation, your daily gross pay rate is $230.77.
This is cheaper for your employer to use as your final pay calculator and the number your company will probably use. So, if you are quitting or being let go three days after your last paycheck, you’ll get an extra $230.77 X 3, or $692.31.
Gross vs. Net Pay
The $230.77 figure is based on your gross pay of $60,000 per year. As you know, your employer takes deductions from each paycheck, such as your FICA (Social Security and Medicare) contributions and any benefits you’ve chosen.
To figure out your net daily pay rate, take one of your paychecks and divide it by the number of days in the pay period. For example, if you get paid each week, look at the net amount of pay you receive (your take-home pay) and divide it by five to get your daily take-home pay.
Read More: If I'm Fired, Can I Get COBRA?
Don’t Forget Your Benefits
When you quit or are let go, you might be able to continue receiving some of your benefits for a limited time. For example, you might be able to continue using your health insurance plan if you qualify under the Consolidated Omnibus Budget Reconciliation Act.
Using COBRA, you might have to pay some or all of your premiums until your eligibility runs out. If you qualify for continuing health insurance under the American Rescue Plan Act, your employer pays 100 percent of the COBRA premiums and is reimbursed by the federal government.
Steve Milano has written more than 1,000 pieces of personal finance and frugal living articles for dozens of websites, including Motley Fool, Zacks, Bankrate, Quickbooks, SmartyCents, Knew Money, Don't Waste Your Money and Credit Card Ideas, as well as his own websites.