84. Salary Doesn’t Matter. Here’s Why…

Professionals tend to assume that the higher their salary, the more successful they are. Indeed, salary is a widely used proxy for career success in organizational research. But I’d argue that salary is a misleading and incomplete predictor of career success. What we should be evaluating is an hourly rate.

Someone that makes $150,000 a year and works 40 hours a week offers more value to their organization than someone who has the same salary but works 60 hours a week. Assuming one works 50 weeks a year, a 40-hour work week leads to an hourly rate of $75, but a 60-hour work week leads to an hourly rate of $50.

We tend to omit this key denominator—hours worked—when deciding on our career track, accepting jobs, and negotiating salaries. Part of the reason is that we don’t think about it. The other reason is that we’re worried that our organization will judge us as unmotivated. This is a mistake on both the part of the individual and the organization.

Individuals should choose jobs with eyes wide open. Your hourly rate is your actual value, not your salary. Plus, failure to incorporate hours worked omits an important component of one’s career success, namely, work-life balance.

Organizations need to get with the program as well. Over time, undervalued employees will inevitably look for alternative opportunities. This is problematic because one of the biggest organizational costs is turnover due to transition and training costs.

It’s time to graduate from discussions of salary towards hourly rate. Doing so will benefit everyone involved.

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