How to Work Out Take Home Pay When Comparing Hourly and Salaried Jobs

When you're weighing up a job offer, it's not always obvious whether an hourly rate or an annual salary gives you more in your pocket. The key is to work out take home pay for both options, because gross figures can be misleading. This guide explains how to convert between hourly and annual pay, what the latest UK benchmarks are, and what deductions to expect.

The Basic Conversion: Hourly to Annual

The standard rule of thumb is:

Annual gross salary ≈ hourly rate × contracted hours per week × 52 weeks

Most employers and job adverts use 52 weeks, even though a year is actually 52.14 weeks. The difference is small – about £105 a year at £20 per hour – so 52 is the safe assumption.

For example, if you earn £20 per hour and work 37.5 hours a week:

£20 × 37.5 × 52 = £39,000 gross per year.

To go the other way, divide the annual salary by (hours per week × 52). A £40,000 salary on a 37.5-hour week gives:

£40,000 ÷ (37.5 × 52) = £20.51 per hour.

Always check your contract for the exact hours and holiday entitlement. If your job includes paid overtime or shift allowances, those will change the effective hourly rate.

UK Wage Benchmarks: What the Data Shows

The Office for National Statistics (ONS) Annual Survey of Hours and Earnings (ASHE) for April 2025 gives a clear picture:

• Median gross annual earnings for full-time employees: £39,039
• Median hourly earnings (excluding overtime) for full-time employees: £19.67
• Median weekly earnings for full-time employees: £766.60

These figures are for employees who have been in their job for at least a year. New starters or those in part-time roles may see different amounts.

From April 2026, the National Living Wage for workers aged 21 and over rises to £12.71 per hour. On a 37.5-hour week that comes to £24,785 a year before tax. The rate for 18–20 year olds is £10.85, and for under-18s and apprentices it is £8.00.

From Gross to Net: What Comes Off?

To work out take home pay, you need to subtract Income Tax, National Insurance, and any pension or student loan deductions.

Income Tax (2026/27)

• Personal Allowance: £12,570 (tax-free)
• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): £50,271 to £125,140
• Additional rate (45%): above £125,140

National Insurance

• 8% on earnings between £12,570 and £50,270
• 2% on earnings above £50,270

Pension contributions are taken before tax, reducing your taxable income. For example, the Teachers' Pension Scheme (TPS) for 2026/27 has tiers from 7.4% (on salaries up to £36,198.99) to 12% (above £104,414). A teacher earning £40,000 pays 8.9% – that's £3,560 a year. After tax and NI, take-home pay is roughly £29,472 a year, or £2,456 a month.

The NHS Pension Scheme works similarly, with rates from 5.2% to 12.5% of pensionable pay. On £40,000 the rate is 9.8%, leaving about £29,184 take-home.

Comparing Hourly and Salaried Offers

When you have one offer that pays by the hour and another that pays a salary, follow these steps:

1. Annualise the hourly rate using the hours you expect to work (including regular overtime if guaranteed).
2. Convert the salary to an hourly rate using the contracted hours.
3. Estimate take-home pay for both using the tax and NI bands above. Our salary articles have more detail on specific professions.
4. Factor in benefits: paid holiday (5.6 weeks is the minimum), employer pension contributions, sick pay, and any London weighting or regional allowances.

A £35,000 salary with a 40-hour week is worth less per hour than the same salary on 37.5 hours. Similarly, an hourly job at £18 with no paid holiday is worse than one at £17 with 5.6 weeks' paid leave.

Common Pitfalls

• Rolled-up holiday pay: Some employers include holiday pay in the hourly rate. The headline figure then looks higher than your true rate for hours worked. Check your contract.
• Overtime: If overtime is paid at a premium (e.g., time-and-a-half), include it in your annual estimate but remember it may not be guaranteed.
• Salary sacrifice: Pension contributions made via salary sacrifice reduce your gross pay for tax and NI purposes, lowering your take-home but boosting your pension pot.
• Student loans: Plan 1, Plan 2, Plan 4, and Postgraduate Loan repayments are 9% (or 6% for PGL) of earnings above thresholds. This can significantly reduce net pay.

Using a Calculator

To get a precise figure for your own situation, use our hourly calculator or the salary data pages. They let you adjust hours, pension contributions, and student loans to see exactly what you'll take home.

Final Thoughts

The best way to compare jobs is to work out take home pay for each offer, not just the headline rate. Use the conversion formula, apply the current tax and NI rules, and remember to include pension and other deductions. The ONS ASHE data gives a reliable benchmark for typical earnings, but your individual circumstances will determine the final figure.

For more on specific pay scales and regional differences, browse our topics section or read about how we calculate these figures.