Why your real rate is lower than your paper rate
Your salary pays for the hours on your contract. But work takes more of your life than that: the trip there and back, and money you only spend because you work. Divide what you actually keep from the job by all the hours it takes, and you get your effective hourly rate. It is usually lower than you think, and it is the fairest way to compare two jobs, or a job with a longer commute and a higher salary.
Worked example
| Job A: office | Job B: remote | |
|---|---|---|
| Yearly pay | $70,000 | $64,000 |
| Hours per week | 40 | 40 |
| Commute per day (both ways) | 45 min | 0 |
| Work costs per month | $200 | $40 |
| Paper rate | $33.65/h | $30.77/h |
| Real rate | $29.71/h | $30.54/h |
What to count
- Commute: door to door, both directions, on the days you go in.
- Work costs: fares, fuel, parking, tolls, work clothes, lunches and coffees you buy only because you are at work, childcare during work hours.
- Unpaid hours: emails at night, getting ready, mandatory events. Optional, but honest.
Leave out things you would pay for anyway, like your phone plan. Pay is before tax, so the result compares like with like against your paper rate.
What people ask next
- How much of my life is commuting? turns the trip into hours per year and per lifetime.
- How much should I save each month? for what you keep.
How we calculate
Real rate = (yearly pay − work costs per month × 12) ÷ ((hours per week + commute hours per week + unpaid hours per week) × 52).
- Pay before tax, so the result compares like with like against your paper rate.
- Commute is door to door, both directions, per workday.
Sources: US Census Bureau — American Community Survey, travel time to work.
Every formula is checked by automated tests. Methodology · Updated