How do you calculate the value of an hour of work?

How much is an hour of your work worth?

Knowing the value of an hour of work is useful for many things: comparing two job offers, understanding what an overtime hour costs, or setting the rate to charge for freelance work. The starting point is the statutory formula in the Portuguese Labour Code¹.

Hourly value = monthly salary × 12 ÷ (52 × hours worked per week)

You can run the calculation in both directions (from salary to hour, or from hour to salary) in our hourly rate calculator.

The article 271 formula

Article 271 of the Labour Code defines the hourly value of pay: it takes the monthly salary, multiplies by 12 and divides by the number of weeks in the year (52) times the hours you work per week¹. It is the same formula used for payslips and for overtime pay, so it gives the official value of your hour.

With a salary of €1,300 and a 40-hour week:

Hourly value = 1,300 × 12 ÷ (52 × 40) = 15,600 ÷ 2,080 = €7.50

Why you multiply by 12 and not by 14

In Portugal salary is paid 14 times a year (12 months plus the holiday and Christmas bonuses). Even so, the hourly-value formula uses the factor 12. The reason is simple: the formula annualises the contractual salary over the 52 weeks in which you work, and the holiday and Christmas bonuses are two extra months of pay, not extra hours worked. So they do not change the value of an hour of work. Anyone who wants their total annual income still counts the 14 months, but the hour is worked out over the 12.

Value per day and per week

From the hourly value, it is easy to reach the value of a working day and a working week:

The day assumes the weekly hours spread over the 5 working days (40 hours a week is 8 hours a day).

There is a result here almost nobody notices: the value of a working day does not depend on the weekly hours. Substitute the article 271 formula and the value of a day is [salary × 12 ÷ (52 × n)] × (n ÷ 5), and the n cancels, leaving monthly salary × 12 ÷ 260. On €1,300 a month, a day worked is worth €60.00 on a 40-hour schedule and the same €60.00 on a 20-hour one. What changes is the hourly value, and it changes because a part-time day has fewer hours in it.

Daily pay: the other daily figure

There is a second daily number, and it is the one that decides money when a day is deducted or paid outside the schedule: the daily pay rate, which is 1/30 of the monthly pay. The law that writes it out is Portugal's public-service employment law, in article 155(3)³, and it is also the divisor a day is counted by in the private sector: article 401 of the Labour Code counts unserved notice by the same thirtieth. The Labour Code uses the phrase "daily pay" (in article 328 on disciplinary fines, for instance) but never gives it a formula.

That is €16.67 apart on the same salary, because they answer different questions: one divides the month by its 30 calendar days, the other spreads the working year.

In the public sector the formula is article 155

Public-sector employees do not use article 271. They use article 155 of Law 35/2014³, which writes the same formula with different letters, (Rb × 12) / (52 × N), with two differences that change the result:

• Rb is the monthly base pay, without supplements, not the payslip total.
• The normal working period is seven hours a day and 35 hours a week (article 105), not the 40 hours of the private sector.

On the same €1,300 base pay, a public-sector hour is worth 1,300 × 12 ÷ (52 × 35) = €8.57, against €7.50 on a 40-hour week. The day worked still comes to €60.00, the same identity as in the previous section.

The hours per week change the value

For the same salary, the more hours you work per week, the lower the value of each hour. See the effect of a part-time schedule:

That is why it matters to enter your real normal working time, not always to assume 40 hours.

From the hourly rate to the salary

The calculation also works the other way round. If you charge €7.50 an hour on a 40-hour week, the equivalent monthly salary is:

Monthly salary = 7.50 × 52 × 40 ÷ 12 = €1,300

This is the logic a self-employed worker uses to turn the monthly income they want into an hourly rate to present to a client.

It is a gross value

The hourly value from this formula is gross: it does not yet deduct the income tax withheld at source or the worker’s 11% social security². To find out how much you take home net each month, use the net-salary calculator, which applies those deductions to the monthly salary.

What about overtime?

Overtime is paid with statutory uplifts on this base hour. For example, on the first hour of a working day the uplift is +25%, and on a rest day or public holiday it is +50%. This base hour is the starting point; the uplifts and the limits are in the overtime calculator.

For the self-employed

A freelancer or self-employed worker can use this calculation as a reference to set their hourly rate from a target monthly income. There is, however, an important difference: the self-employed worker has no bonuses, pays social security and income tax on their own account and bears periods without work. So, to reach the same net pay as an employee, they usually need to charge a higher hour than the one this formula returns for an equivalent salary.