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Annualized salary is a term used for a pre-set amount of gross pay per month throughout the 12 months of the year for an employee. It totals the estimated yearly earnings. When creating a budget, determining an annualized salary is helpful. It is also particularly helpful when creating the budget for full-time employees who aren't expected to work a full year, as well as for hourly and part-time staff.
In addition, using an annualized compensation mechanism enables employees to get a set, consistent paycheck for a set rate every month of the year. For example, If a school employee makes an annualized income, they will still be paid throughout the summer even if they only work ten months of the year. It will also make it simpler to divide or spread out the expense of taxes, insurance, and other perks when it comes to payroll deductions.