The disadvantages of being paid a salary generally focus on time devoted to work and compensation or reward for the employee's level of commitment. The primary disadvantage of a salary job is that the employee is bound by a fixed pay for a fixed number of hours each workweek, and even if the employee devotes an inordinate amount of time and energy to her job, she still receives the same salary as though she was putting forth the minimal effort necessary to sustain employment.
Salaried employees are generally exempt from the Fair Labor Standards Act, which enforces overtime regulations in the workforce. Employees who are considered hourly and nonexempt receive overtime compensation equal to 1 1/2 times their hourly rate, pursuant to the FLSA. Salaried, exempt employees, however, are exempt from the FLSA overtime rules and are not entitled to extra compensation under the FLSA.
Regardless of the hours you spend working when you're paid on a salary basis, your paycheck stays the same. Salaried employees aren't entitled to overtime pay unless they're salaried and nonexempt, which often is a rare combination. Generally speaking, salaried employees are exempt from the FLSA overtime rules and they receive the same salary amount whether they work 40 hours in a workweek or 60 hours in the workweek. This is a disadvantage if you believe you should be compensated for every hour of work you put into your job.
Many salaried employees are considered exempt because they meet the criteria for the FLSA's administrative, executive or professional classification. Employees in these positions are responsible for managing processes and managing employees; however, the prestige attached to being in charge of personnel also can be a disadvantage. If you're responsible for the work performed by employees who report to you, you also are responsible for their performance levels. Being an effective delegator means nothing if the subordinates to whom you delegate work don't perform their tasks satisfactorily. As a salaried, exempt employee you're the one held accountable for the performance of other employees under your supervision.
When an employer notifies employees of a hiring or salary freeze, employees understand that adding more staff probably won't happen anytime soon, nor will they receive salary increases, because of business conditions or the economy. Salaried, exempt employees are subject to companywide freezes on their salaries, unlike hourly, nonexempt employees whose wage increases are may be part of a contractual agreement to which the employer must adhere, such as a collective bargaining agreement, or labor union contract. Even in nonunion work environments, the hourly wage rates may be firm rates according to prevailing wage amounts or expected hourly rates for certain jobs. Salaries, on the other hand, may be arbitrarily set amounts with no rhyme or reason, if the employer doesn't have a well-constructed compensation structure.
Employees who reach the maximum salary level for their position, yet have limited career options with the same employer, become what's called "red-circled" employees. Red-circled employees are the highest-paid employees in their wage group and they usually are not entitled to wage increases. Unfair as this might seem, employers and employees struggle with what happens to red-circled employees because not giving salary increases doesn't bode well for an employer's reputation when it has given consistent salary increases year after year.