How to Calculate a Daily Equivalent Salary

If you are tracking labor costs on a daily or weekly basis, it is helpful for you to know how much you pay employees each day. Another reason you might want to know the daily pay rate for your employees is to gauge how much you should pay a part-time worker or a consultant who works for a firm, fixed price rate for a full day.

However, determining an employee's daily equivalent salary might not be as simple as you think. Follow these steps to get an accurate calculation of an employee's average daily salary.

Determine Employee Annual Salary

Check with your human resources department or payroll clerk, which should maintain data on employees' current pay rates. When you confirm the employee's pay rate, ensure that you have the correct rate. Also make sure that it doesn't include commission payments or discretionary payments, such as a bonus. Use the base amount only to achieve accurate calculations.

Determine the Hours Worked Each Year

There have been several discussions about how many hours full-time employees actually work. The U.S. Office of Personnel Management rules are based on 2,087 hours per year, and there are private-sector employers who undoubtedly follow the federal government's direction.

However, for mathematical ease, many employers stay with the 8-hour day, five days a week, 52 weeks a year to arrive at the usual 2,080-hour work year (8 x 5 x 52 = 2,080), according to Balanced Comp.

If you're one of the companies influenced by the French movement to 35-hour work weeks, then your employees work 7-hour days, and the annual number of hours worked is 1,820 (7 x 5 x 52 = 1,820).

Calculating the Daily Rate

AccountingTools describes several methods of calculating an employee's annual earnings. Say your employee earns $50,000 a year, and she works a 40-hour week, her hourly pay is the annual amount divided by 2,080 hours (50,000/2,080 = 24.038, which you can round up to 24.04). For the employee's daily rate of pay, simply multiply 24.04 by the number of hours worked each day. In this case, the employee's daily rate is $192.32 (24.04 x 8 = 192.32).

If you pay the same salary to an employee who works 35 hours a week, the hourly rate is obviously going to be slightly higher. Divide 50,000 by 1,820 (50,000/1,820 = 27.472), and the hourly rate is $27.472, which you should round down to $27.47. Remember, the daily rate is based on seven - not eight - hours, so the daily rate for this employee who works seven hours a day is $192.29 (27.47 x 7 = 192.29).

When to Use the Daily Rate

Aside from tracking labor costs on a daily or weekly basis, you can use an employee's daily rate to determine how much you should offer a consultant for a day's pay, for example. Of course, your employee pay is based on your costs for insurance and your employer tax contributions (usually, federal and state unemployment taxes). But this daily rate could be a starting point, because a consultant will likely charge more than the typical employee daily rate.