What Formula to Use to Calculate Annual Salary?

What Formula to Use to Calculate Annual Salary?
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Figuring out your annual salary is crucial to good budgeting, but it can be tricky when you have to consider overtime, bonuses and commissions. While you may not always be able to arrive at an exact number for your annual salary due to these factors, you can at least determine a range your earnings will likely fall into.

Hourly Wage Determination

The first step to determining your annual salary is to determine your hourly wage. Look at your paycheck stub or contract for this number, or ask your employer.

Annual Salary Calculation Without Paid Overtime

To arrive at your annual salary if you do not work or are not paid extra for overtime, enter your hourly wage into a calculator. Multiply this number by the number of hours you work in a day, and then multiply this number by the number of days you work in a week to arrive at your weekly salary. Avoid including overtime hours beyond 40 hours per week in this calculation, unless you are paid the same wage for overtime and regular hours, in which case you should include them. Enter your weekly salary into a calculator. Multiply your weekly salary by 50 (assuming two weeks off per year) to arrive at an estimate of your yearly salary.

Annual Salary With Overtime Calculations

If you work overtime and are compensated more for it, you will need to include that in your annual salary calculations. Write down how much you are paid for each hour of overtime that you work to arrive at your overtime wage. Multiply your overtime wage by the number of overtime hours you work each day. Multiply this by the number of days you work each week if you consistently work the same amount of overtime each week. Multiply this number, your weekly overtime, by 50 to arrive at an estimate of your yearly overtime salary.

Total Annual Salary

If you do not work overtime regularly, or if your overtime varies from week to week, check your pay stubs or tax forms from the previous year to determine how much overtime you made. Use this number as your overtime salary if you believe you will work approximately the same amount of overtime this year. Increase or decrease this number accordingly if you believe you will work more or less overtime. Add your annual salary without overtime, as described in the previous, to your overtime salary. This will give you your total annual salary.

Bonuses or Commissions

If you frequently receive bonuses or commissions for certain achievements, calculations can become trickier as you cannot always anticipate how much these will be. Use what you made during the previous year in these areas as a guide, or average the bonuses and commissions you received each year if you have worked at the same place for more than a year. You can determine the lowest amount you made from bonuses and commissions, and also the highest amount. If you do not have these numbers handy, ask your payroll department or boss to get it for you. To estimate your salary range, complete one calculation with the lower end amount and another with the higher end amount.