An annualised salary is the estimated total gross pay an employee would earn over a full year, derived from their current wage or salary and adjusted to a 12-month period – even when employment is seasonal, part-time, or fluctuating.
Unlike a fixed annual salary, this figure can include base pay and relevant additions such as overtime and commissions.
Using an annualised salary approach offers several key benefits:
Enables consistent budgeting and forecasting by projecting payroll costs over a full year – even when hours vary.
Helps employees and employers understand total earnings clearly – crucial for financial planning, salary comparison, and negotiation.
Supports standardised compensation, particularly for part-time or seasonal roles – ensuring steady pay delivery throughout the year.
For hourly employees:
Annualised salary = hourly wage × weekly hours × weeks per year
Example: an employee earning $20/hour, working 40 hours/week for 50 weeks/year would have an annualised salary of $40,000.
For salaried or partial-year roles:
Annualised salary = (total earnings ÷ number of months worked) × 12
Example: if someone earns $16,000 over four months, their annualised salary would be $48,000.
Term | Definition | |
Annualised salary | Projected earnings over 12 months, based on current pay or hours worked. | |
Annual salary | Fixed year-round pay, regardless of hours worked or additional earnings. | |
Annualised compensation | Includes total financial benefits - such as bonuses, commissions, insurance - on top of base pay. |
For businesses operating across borders, using annualised salary helps:
Harmonise compensation structures across various employment types (full-time, part-time, seasonal).
Streamline payroll planning, especially when integrating data from global payroll services or EOR (Employer of Record) setups.
Improve employee transparency and satisfaction, as pay expectations are clearly communicated – even when working patterns differ by region.
Global payroll services: outsourced management of compensation, taxes, and compliance across countries.
Employee compensation benchmarking: comparing salary standards across markets to ensure fairness and competitiveness.
Salary benchmarking: analysing pay against industry and regional standards to align wages.
Accrued payroll: payroll costs incurred but not yet paid within the accounting period.
Annualised compensation: full yearly remuneration including bonuses and non-wage benefits.