What is a larger number 100 or 90? If you type 90 into a microwave it will take 30 seconds longer than 100. An employee working 160 hours/month will work 80 free hours per year. Learn why 👇
All math is not created equal and anyone that is working a W2 job with an annual salary has been working 80 hours unpaid every year.
When you are hired by your company, either as a 1099 or W2, you agree on a salary then divide it by 12 to invoice monthly. (or 24 for biweekly.)
Day 1 starts, you get settled into your comfy lounge chair you bought, because you know, everything is remote - and dig in. You track time towards an 8 hour day - 40 hours a week.
After the first month, you invoice for 160 hours. Basically 4 weeks of work, 8 hours a day, 40 hours a week. What a month - you nailed it.
Your boss agrees to keep you all year and send your invoices to the accountant which will estimate the next 12 months of work with 160 hours per month providing you with 1920 hours for the year.
Wait, everyone knows that Employees work 2000 hours a year.
Ah yes, we forgot holidays - and most employers give 10 holidays or 80 hours - which perfectly brings us to 2000 hours.
But the employee will work an extra 80 hours for the company without getting credit for it. How?
8 Hours a Day, 5 days a week, 52 weeks a year is 2080 hours. Not 1920.
The answer is rather obvious, there are some months with more than 4 weeks.
And doing simple math gives you your intended monthly targets.
2080 hours a year / 12 = 173.33.
So every month you are working 13 extra hours for the company.
If you had agreed on an hourly contract good for you... You're getting paid fairly.
But if you agreed on a monthly salary your giving up 13.33 hours a month for free.
Why does this matter?
If you are a business owner and need to figure out cost structures, project margins and efficiency ratios then you need to use 173.33.
If your an owner that calculates the monthly work at 160 hours your numbers are wrong.
At NineTwoThree we calculate daily DLER per employee which is the most important number for an agency or startup writing code.
Learn about DLER here.
In conclusion most companies are not actually screwing you because you agreed to an annual salary. But accounts went to school with microwave engineers and have learned how to steal time.
The next time you type 90 into the microwave think about how that's 30 seconds more than 100 and take that time away from work. Then repeat that 9600 times to earn your 80 hours back.
Then think of this article and give it a thumbs up.
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