Benefits of Employee Salaried or Hourly with Pros and Cons

pros and cons of salary vs hourly

What’s better in the USA? – Salary vs Hourly

The remuneration you’re being offered plays a major role as one of the deciding factors of whether or not to take on a job. Just like you contemplate about your responsibilities of the job, your new role and company culture, similarly, you also contemplate the way you will be paid before accepting any job position. There is generally two way of how you get paid – Salaried and Hourly.

Salaried employees are paid a set amount each year to get the work done irrespective of how many hours of work are required per week to complete their core responsibilities. Hourly employees are paid a set wage for the exact amount of time they work. They also get compensation for the hours exceeded beyond the standard 40 hour work week. Many people are happy ongoing from hourly to salary and many people don’t choose to go from hourly to salary. So, in the battle of salary vs hourly which triumphs? Let’s find out!

Exempt vs. Non-exempt Positions – While considering your source of compensations it is vital to figure to out of whether the position you have been offered is classified as exempt or non-exempt under the Fair Labor Standards Act (FLSA). If you’re a non-exempt hourly employee you’re entitled to overtime pay compensation at a rate of 1.5 times the regular pay rate for any overtime hours worked than the standard 40 hour work week. Exempt employees are not. They must earn at least $455 per week on a salary basis and perform exempt duties, such as managerial tasks.

Well, check out the pros and cons of salary vs hourly below:

Salary Pay: Pros and Cons –

Pros –

  • Employees that are paid on a salary basis are guaranteed a certain dollar amount per paycheck with no fluctuations. Regardless, of the span of time you work for or if your company is closed for the holidays it will not impact your compensation. Also, their overall compensation is higher than those working on an hourly basis.
  • Salaried employees are more likely to get access to benefits such as health care, retirement contributions, larger bonuses, and more paid vacation time than hourly employees.
  • You get additional perks such as vacation days or a more flexible schedule. For instance, if you wish to leave early, you might be able to take the afternoon off.
  • Salaried positions often come with a higher status.
  • Salaried employees tend to have a more regular schedule than hourly employees.
  • Starting salaries often begin far enough above hourly rates to be able to afford a down payment on a house or car.
  • An equal portion of their annual compensation every week will be received by salaried employees.

Cons –

  • The employee won’t get overtime compensation unless the salary position doesn’t meet all the requirements to be “exempt”. Unlike the hourly employees who work for a set amount of time, salaried employees may work after hours or extra hours (beyond the 40 hour work week) without receiving the additional compensation that they would get had they been an hourly employee.
  • Salaried employees struggle to separate professional and personal life. You’re required to be at constant contact with your office thanks to the smartphones and email unlike the hourly employee, which can get exhausting and intrusive after a while.

Hourly Pay: Pros and Cons –

Pros:

  • The main perk of hourly pay is that employees are paid for the time they work with no exceptions.
  • They are also entitled to receive overtime pay when they work for more than 40 hours in a week. Although the overtime rate is set at time-and-a-half your normal hourly rate, in many cases, employers may pay double the normal hourly rate when employees work on holidays. Hourly employees must add this condition in their contracts. They can also increase their weekly earnings by agreeing to work overtime if the employers request it.
  • Hourly employees have a better work-life balance than salaried employees. They do not have to take their work home with them because they won’t be compensated once they leave their job site.
  • Unlike salaried employees who bear the responsibility for the growth of their company, hourly employees are generally not held responsible if anything goes wrong with the company.
  • Because they are paid according to the time they spend at the workplace, hourly employees will try to maintain the quality even the quantity might be less. Whereas, salaried employees work under constant pressure to meet the goals and targets so they will try to meet the quantity and not the quality of the product or service they provide.

Cons –

  • No guaranteed salary per month as they do not have any fixed income since they work on an hourly wage rate basis. If a company is going through a tough time, their hours may get shortened or they completely lose the job.
  • Some companies do not allow hourly employees to work for additional overtime hours and they are required to stick to 40 hour work week. This means if they wish to earn a little extra they won’t be able to.
  • They get offered a lower benefit package as compared to the salaried employees.

Hourly vs. Salary Comparison:

Hourly Salary
Cash Payments Get paid hourly

 

Eligible for overtime pay in some situations

Fluctuation in income

Get paid a set amount each month, regardless of how many hours you work

 

* Warning: Hourly take-home pay can be pretty low if the hours are demanding!!!

Benefits May or may not be included (it depends) Typically includes benefits package (health insurance, vacation / sick time, retirement plan)
Schedule They generally have a fixed schedule They have a more flexible schedule.
Employer Incentive Avoid having to pay employee overtime (keep it to a 40 hour work week) Work employee as hard as possible (above 40 hours per week)
Nature of Work Get paid to perform a specific duty Get paid to oversee, coordinate, communicate
Career Track Entry level, skilled labor, technical, contracting for services (used to be “blue collar”) Anything they can consider salaried they will (traditionally “white collar” jobs)

Conclusion: After weighing in the above-listed pros and cons you can decide for yourself which route you want to take. However, you must remember that only money should not be the main criteria you base any decision on.