Why calculate an hourly wage?
Some employees in Germany receive a fixed amount per month for the work they do. If this amount remains the same per month, but the number of hours worked varies – for example, due to overtime – you quickly ask yourself how high the hourly wage actually is. An hourly wage calculator can provide this answer – and usually with just a few clicks.
Hourly wage calculator: What does the tool do?
In the case of permanent employees, the amount of the gross wage or salary paid each month can usually be found in the employment contract. However, this does not mean that employees know how much they earn per hour. That’s what the hourly wage calculator is for.
With this tool, you can find out how high your own hourly wage is with just a few clicks. You enter your own data into the hourly wage calculator and leave the calculation to the tool. The calculator needs the following information:
- Your own wage or salary in gross
- The desired payroll period
- The number of hours worked
After entering and confirming the data, the hourly wage calculator provides the amount of your own hourly wage. Very simple!
Calculate hourly wage
But there is another option: namely, to calculate the hourly wage manually. This works with the following formula.
In order to actually arrive at a meaningful hourly wage, this formula considers a longer period of time, namely a whole quarter. For this reason, the monthly wage of three months is used as the basis for calculation.
Monthly salary (gross) x 3 / 13 / weekly working time = average hourly wage
In addition to the triple monthly salary, you will encounter other information in this formula: The number 13 stands for the weeks you have worked in the quarter. Here, too, an average value is assumed in order to arrive at a plausible estimate of the hourly wage.
Granted, this formula is obviously not as accurate as determining your hourly wage with an hourly wage calculator, but it will give you a good initial idea of your average earnings per hour.
If, on the other hand, you would like to calculate your hourly wage on the basis of your annual salary, because this is the only one specified in your employment contract, you must resort to a different formula. In this case, the following calculation applies to the hourly wage:
3 x Annual salary / 12 / 13 / average working time = hourly wage
This formula may give you a better idea of your hourly wage. This is because this formula also takes into account special payments such as vacation or Christmas bonuses. With the above formula based on monthly wages, this is not readily the case. Depending on which quarter you choose for the calculation, you may not even catch the period in which you receive a special payment. And that distorts the actual hourly wage.
However, if you decide to calculate it on the basis of annual income, this cannot happen. This way, you have an overview of how your hourly wage shaped up over the entire year.
Calculate hourly wage: Examples
Below are a few examples of how calculating hourly wages can work without an hourly wage calculator.
Let’s assume you earn 2,900 euros gross per month and your average working hours are 38 hours per week.
Then this results in the following calculation:
2.900€ x 3 / 13 / 38 = 17,61€
Let’s also assume here that you earn 2,900 euros gross, but work 40 hours instead of 38.
This in turn would result in the following hourly wage:
2.900€ x 3 / 13 / 40 = 16,73€
The calculation for self-employed: calculate hourly wage or hourly rate?
Above we talked about employees who can use an hourly wage calculator or a corresponding formula to calculate their hourly wage based on a specific salary.
For the self-employed and freelancers, however, it’s a little more complicated. This group of professionals usually does not have a fixed average salary to orient themselves by. However, that doesn’t mean that this group couldn’t benefit from an hourly wage calculator. On the contrary, it is probably even more important for them than for salaried employees.
Self-employed and freelancers have to calculate for themselves which prices pay off for them. This means that not every project that looks lucrative at first glance really is. If the time spent and the payment are not in good proportion to each other, the job may turn out to be a mistake.
In addition, overtime, sick leave and vacation are not paid by a third party such as the employer or health insurer. Self-employed persons must therefore also absorb these costs through their hourly wage. Which ultimately means that the costs must already be taken into account when planning the job. The hourly wage calculator is also worthwhile for this case in order to get a quick overview.
An hourly wage calculator can therefore be a very useful tool for checking orders and projects for profitability and thus, in the best case scenario, save the self-employed person from making the wrong decision.
Hourly rate instead of hourly wage
By the way, for self-employed persons, freelancers and entrepreneurs, one does not speak of an hourly wage, but of an hourly rate. However, both terms refer to the payment received per hour worked.
However, since the self-employed have to cover more costs than employees through their pay, the hourly rate is used for this group of people. In addition to the costs already mentioned, such as vacation, sickness and overtime, which self-employed persons must cover via their hourly rate, the following costs are also added:
- Rent for office, commercial space and storage
- Electricity, water, telephone and internet
- Heating costs
- Various insurances
- Costs for employees
- Marketing expenses
- Office supplies
Depending on how extensive the company is set up, these costs may be higher or lower. This is another reason why it is worth calculating the hourly rate before agreeing to a project as a self-employed person.