Salary Vs. Hourly Employment

Some workers are paid by the hour, while others work on an annual salary. If you are on a salary, you know how much you are going to earn with each paycheck. Your payment usually does not increase unless you get a raise or have some sort of commission structure associated with your earnings. A salary is an agreed-upon amount that does not change depending on the hours you work in any given week. An hourly employee is much different. His payment is directly associated to the amount of hours he worked in that pay period.

Exempt vs. Non-Exempt

The Fair Labor Standards Act (FLSA) requires that all employers classify employees as non-exempt or exempt. If you are an hourly employee, you are considered non-exempt. Non-exempt employees must be paid the federal minimum wage, must be paid overtime if they work over 40 hours a week, and their overtime pay must be 1.5 times their hourly wage.

Salaried employees are considered exempt, which means they are exempt from overtime. Their weekly income must be $455 or higher, though this varies in different cases.

Overtime

On an hourly schedule, employers are required to pay overtime rates to anyone working over 40 hours per week. Overtime is generally time and a half. So if you usually make $20 hourly, you should be paid $30 for any time going over your 40 hours. This is required for an hourly worker.

Depending on the situation, salaried employees at times may have to work overtime, but will not have overtime compensation because they are on a set annual salary. You can try to negotiate an overtime compensation with your employer, but this is not very common. In an hourly position, you will always be paid for the extra time you put in because you are being paid for every hour you work.

Benefits

The hourly employee typically does not receive benefits through the company, including medical, dental, 401k, vacation/sick days and holiday pay. This must be taken into consideration when taking either a salaried or an hourly position. A company spends a lot of money on employee benefits, so you have to remember that in a salaried position, the company is paying a lot more than just your annual salary.

Minimum Wage

An hourly employee, according to the Fair Labor Standards Act, must be paid a minimum hourly wage, which is either the federal minimum wage or a minimum wage determined by a particular state. In California, the hourly minimum wage is $8.00 an hour. All salaried employees are required to make a minimum of $455 per week, though this rate varies according to the state and the employer.

Considerations

There are definitely the pros and cons for both forms of employment. The salaried employee makes no overtime, while the hourly employee generally has no benefits. Keep this in mind when looking for an hourly or salaried position.

References

• Salary Talk
• Salary vs. Hourly Clearly Defined
• Fair Labor Standards Act Advisor