Start thinking post-tax, per hour

We choose careers based on gross pay per year

Lots of people I know chose corporate jobs as they “pay well”. Starting salaries in the £40ks and £50ks lure people into consulting, banking and law without much thought.

I don’t think they’re looking at the right metric.

We should choose jobs based on net pay per hour

A better metric should be net pay per hour.

Why? It reflects real (i.e. post tax, in your pocket) income, and brings time spent working into the equation.

Net pay per hour

In most jobs we’re exchanging our time for money, so it makes sense to understand the price tag we’ve put on that time. Then we can properly assess whether we think that’s a fair exchange.

The London Living Wage is £10.15 per hour. Assuming someone works a 40hr week, this will drop to about £8.53 post-tax. If you’re earning somewhere in the £40ks but working a 60 to 70 hour week, you’re probably just earning the living wage.

Graduate lawyers earn less than a civil servant

If you’re optimising for gross annual salary, hopefully you can see that your earnings aren’t quite as spectacular as you think. I assume most graduate bankers don’t expect to be earning the London Living Wage.

To put it in context further, we can compare the salaries for different career choices, at three stages: graduate level, three years in and five years into your career (I’ve made a few assumptions, based on anecdotal data from friends here).

Net pay per hour

This tells us a few things:

  • Bankers and civil servants consistently earn roughly the same per hour
  • Graduate law and banking jobs will milk you, with the lowest pay per hour
  • As you get more experienced, law pay does start to get ahead of civil service
  • Software engineers are, on balance, killing it

Life isn’t just about money, it’s about freedom too

This post is intentionally provocative. Obviously going into banking and law will mean you end up with more money - at an aggregate level - but is it worth it?

In the most time-consuming jobs - like banking and law - you can end up working over 60 days extra per year on your public sector or software engineering pals. That’s 60 full, 24 hour, days extra per year.

If you assume a ‘normal’ working day is 8 days, those 60 extra days actually become 180 extra working days. I.e. half a year’s worth of extra working, every year.


That’s a lot of time you take away from other things. Like seeing friends for a drink or dinner or the theatre mid-week. Like talking to your family, or partner. Like exercising, and staying in good shape. Like making the most of sunny summer evenings in Victoria Park or London Fields.

Yes, you may say “I’ll do banking for a bit, get loaded and then stop”, but it rarely plays out like that. See here and here for more thoughts on the “deferred life plan”, and why it’s a bad choice.

Most people don’t really want to retire in their 30s, they want to enjoy their job and have time to spend doing things they enjoy. We tend to place too much emphasis on the total number, and discount the extra time needed to generate it.

This is particularly worth bearing in mind if you’re starting out in your career. Do you really want to be missing out on your twenties?

Commute, flexibility, and other things to think about

When you’re doing these calculations and thinking about careers, it might be worth thinking about a few other variables:

  • Commute time
  • Flexible working
  • Part-time working

First, commute time. When we consider commute time the picture can change substantially. I currently cycle 20mins to work, but I know some people who commute over an hour each way. That’s an extra 6.5hrs per week that they lose for work. That will definitely bring the pay per hour down.

Second, flexible working. The commute becomes irrelevant if you can work from home regularly. Lots of companies are starting to encourage this, and all the associate life/health/happiness benefits it brings. Not only that, but in the wider context of financial independence you can dramatically cut your living costs whilst maintaining your salary.

Finally, part-time working. Software engineers earn a great rate per hour. There’s no reason someone on a £80k+ salary couldn’t just drop down to 4 days a week. Worth bearing in mind?