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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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# A B C D E F G H I J L M N O P R S T U V W X Y Z

Annualized salary

How’s annualized salary calculated?

Annualized salary is an estimate of an employee’s total yearly income based on the hours they work and their pay structure. Unlike annual income which represents the amount a person will earn irrespective of hours worked, annualized salary depends on the time they have actually spent on the job. You can calculate annualized salary by taking an employee’s earned income, dividing this by the number of months worked, and then multiplying by 12.

One of the great benefits of annualized salary is that it provides employees with a predictable way to manage their income. They can budget knowing how much they’ll earn in a year and understand when they’ll be paid.

On the employer side, annualized salary supports budgeting for labor costs, providing a clear and consistent framework for financial planning and resource allocation. It also helps them to see whether they are properly valuing their employees in order to retain them.

To properly assess whether an annualized salary provides fair compensation to an employee, you also need to consider annualized compensation. This term is used to describe the total benefits offered to an employee over the span of a year, such as health insurance and retirement plans.

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