Have you ever wondered how much you really earn? Not per year or per month, but what every precious hour of your life is worth to the company you are working for?
I remember, in the beginning of my corporate career I was involved in a transformation project that required many of us to stay long hours. The project was a corporate wide move following a merger from one wealth management portfolio software to another. As often with these type of projects companies bring on outside help. I was fortunate in that I got to work with some wonderful people, a team of consultants from one of the Big 4 firms. I spent many a days working until 9:30, 10pm, but that was nothing in comparison to these young men and women. As the night set and the clock's hand moved closer to the final hours of the day, I sat in my office looking at some numbers on the screen. This was a particularly long day when at around 11:30 pm the door opened and three of the consultants popped their hands in to wish me a Good Night.
“Are you guys are still here?” I asked.
“Still? Oh, that’s an early night for us,” one of them answered, “We generally stay until after midnight.”
Midnight, every day,I thought, that was indeed a heavy workload.
The next day, in a random conversation with one of the consultants in her early 30s with whom I had become personally close, we fell on the issue of their long hours.
An Epiphany
"You guys do work long hours," I said. "It must be quite exhausting. You're in the office at 7- 7:30 with us and don't leave until the early hours of the following day."
“That’s our life – long days and nights. And you know what, despite everyone believing we're rolling in money, the pay is actually, how do they say in French, comme ci, comme ca. Not great really considering the long hours we spent in the office and the short weekends when away on consultancy projects.”
A consultant is not earning enough, I wondered. I was astonished that a highly paid consultant would feel that her pay is too low. She compared herself to a friend working for a large automaker who, she argued, made substantially more if you were to compare their pay on an hourly basis was profoundly puzzling. According to my consulting friend, she, despite working a multiple of his weekly hours, was significantly less. This all, despite her annual salary plus bonuses being higher than her corporate friend's salary.
Shouldn't she feel good then? She was making more money, wasn't she? In fact, she wasn't earning more. It all came down to the financial reward she received for every hour of her lifetime. It's her life, it's your life, it's my life, it's our life. Shouldn't we receive as much as possible for our precious time? After all, we only have this one life.
Let's break down why she felt so bad about her salary:
Assuming a salary of $/€/£ 80,000 per year for the consultant and “only” $/€/£ 65,000 for her corporate friend, similar bonuses and perks, the difference is a staggering $/€/£ 15,000. That does not sound worse off in my books.
With her four, at least, 14.5 hour work days from Monday to Thursday and her regular Friday of 8 hours (from 8am – 11:30 pm; 1h lunch break) she accumulated 66 hours per week. Some of her extra hours were compensated; primarily through time off, but that accounted for only 50%. On top she was still facing the flight home Thursday evening and her Sunday flight back to her client, the headquarters of our bank. Even if we disregard her journey time home, as she was frequently traveling back during office hours, adding the lost hours every Sunday – for her it was a very short journey of only 3 hours door to door each way – she looked at an additional 24 hours per month (6 hours per week * 4 weeks), uncompensated.
Hence, every week she worked 72 hours (66 hours in the office + 6 hours weekly travel) or 288 hours per month (264 hours in the office + 24 hours monthly travel). Let’s not forget, that time does not include the morning and evening journey and potential work in the hotel or on weekends at home. This translates into
Her corporate friend, on the other hand, spent the best part of his week in the local HQ. He also had the daily journey to work, but only went on similar length 3-hour business trips once per month. He usually traveled during office hours and was compensated for the occasional overtime. His contract stated a 40-hour work week.
The Value of Overtime
The difference in weekly hours adds substantially over the course of a year and sheds a different light on their salary difference. The extra 26 hours per week she worked more than her friend represented a full-blown 1,144 hours in a 44 week work year (excluding holidays and bank holidays; this is even higher in countries with fewer holiday entitlements).
Despite the $/€/£ 15,000 she earned more per year, each hour she worked extra was worth $/€/£ 13.11 to her employer. This is certainly not fantastic pay and this is 1) before taxes and 2) comes with an intense lifestyle of long hours and precious time away from family and friends.
But you might still be wondering how much the two earn per hour based on their total annual hours? Most low paying jobs state the pay someone receives for every 60 minutes they spend on the job; and so do high paying professions such as lawyers, doctors, psychologists, and independent consultants. Employees, however, are usually told their salary in annual or monthly figures.
The Value of an Hour of Your Lifetime
So what about my old colleague and her corporate friend? At 40 hours per week over a 44 week work year, he works 1,760 hours in total. With his base salary of $/€/£ 65,000, he pockets $/€/£ 36.93 per hour. That is before taxes, health insurance, retirement contributions, and any other type of deduction.
Given that my consultant friend worked an extra 1,144 hours per year, her total annual hours were 2,904. At $/€/£ 80,000, each hour is rewarded with $/€/£ 27.55. Of course, this does not take into account any bonuses who will certainly alter this, possibly even in her favor. Her friend working in a corporate environment is, however, certain to also receive a bonus. But her point held indeed true: her corporate friend did earn more per hour.
But these are above average examples. Take an average US salary*, for instance, $ 44,888 (€40,029 / £ 29,137) based on 1,788 working hours. The average hourly wage is thus $ 25.10 (€ 22.38 / £ 19.31). When you break down annual salaries, it may or may not come as a surprise that you are actually getting paid much more or less for each hour at work than you had initially thought. Thus, make the best of your time and get the most out of it. Maybe even rethink the way you look at annual salaries. After all, you only have this one life so make every minute and hour count.
*http://www.ssa.gov/oact/cola/AWI.html
http://stats.oecd.org/index.aspx?DataSetCode=ANHRS
