Posted by Mike Smith :: January 19, 2008 @ 8:29 am

Despite the apparently higher pay that comes with being a salaried employee, all of the extra time put into the job can make the per-hour wage quite low. Taking advantage of all of the tools at your disposal can help to raise your effective hourly wage.

Determining your hourly wage as a salaried employee is quite simple. Simply divide the total amount of money you make in any one period by the number of hours worked in that amount of time. So if you make $50 K per year and work about 60 hours per week, then you’d be making $50K/(60 hours/week*52 Weeks) = $16.03 per hour. While this is certainly better than many hourly wages, it likely isn’t nearly as high as you imagined.

Since we can’t do much about the top line of the equation, the only way to raise our hourly wage is by reducing the number of hours worked. Cutting back on the hours you work is never easy, but shaving even one or two hours a week off will have an effect. Dropping to 58 hours per week brings the hourly rate up to $16.58 in our example.

The much more effective way to reduce the number of hours worked is to take full advantage of your paid time off. In addition to vacation, many salaried employees also receive sick days and personal time. While unused vacation time typically carries over from year to year, sick and personal time is often granted on a “use it or lose it” basis each year. I strongly suggest that you use it. There’s nothing wrong with using all of your allocated time in a given year. You will certainly have enough valid personal business to use your personal time throughout the year and being “sick” is a highly subjective concept. I’m not suggesting that you exploit your sick and personal time but rather take full advantage of it when the need arises.

Using your time off can significantly raise your effective hourly wage. If you took 2 personal days, 3 sick days, and two weeks of vacation, then your hourly wage in the scenario above would jump to $17.24. While you won’t see an increase in your bank account as a result of this exercise, you will see a dramatic increase in the time you have available. The value of that time will be whatever you make of it. Whether it’s spending time enjoying friends and family, exercising, or helping your financial situation by taking the time to get your budget in order. This is true particularly at the beginning of a new year. Perhaps investing this time will yield some extra money to invest in a person-to-person loan portfolio at Lending Club. Either way, making effective use of that extra time makes it even more valuable.

Cutting back to 40 hours a week (or less if permitted) and taking all of your available time off is the ultimate way to maximize the effective hourly wage as a salaried employee. Even if you can’t do that, reducing the number of hours you’ve worked will raise your effective hourly wage and give you the extra time to do the things you really enjoy.