What Is Better: Salary or Hourly Pay?

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Whether it's better to be salaried or hourly depends on your preferences on pay, flexibility and hours worked. Although salaried workers tend to enjoy higher pay and more flexibility than hourly workers, they have fewer labor protections and work more overtime on average.

Legal Protections

Salaried workers don't have the same overtime protection that's afforded to hourly workers. They usually are classified as exempt, meaning they are exempt from the overtime protections of the Fair Labor Standards Act. This act requires employers to pay nonexempt employees time-and-a-half for any hours worked in excess of 40 in a week, something that is not required for exempt, salaried employees. Considering that Gallup reports the average full-time worker logs 47 hours a week, the lack of overtime pay for salaried workers can be financially significant.

Lindsay Olson, partner and recruiter for Paradigm Staffing, recommends that hourly employees evaluate how many more hours a week they'll work in a salaried role before making the switch. If you're racking up lots of overtime pay in an hourly position, she points out that you may actually earn less as a salaried worker.

Many other states place even stricter requirements on employers with nonexempt employees. For example, California requires that hourly employees be given a 30-minute meal break and a few rest breaks if they work more than six hours a day. California employers technically don't have to offer any break to salaried employees.

Pay Considerations

While federal and state labor laws don't afford many protections to salaried workers, they do mandate they receive a higher pay rate. Employers are only required to pay hourly employees minimum wage but the Fair Labor Standards Act requires employers pay salaried employees at least $455 a week, as of 2015.

Poll data from the Economics Policy Institute shows that it's salaried workers, not hourly ones, who tend to be rewarded with high pay rates. Of employees who earn more than $60,000 annually, 37 percent are salaried workers and only 9 percent are hourly. If you want to command a high salary, you may have no choice but to accept a salaried position.

Amount of Flexibility

As an employee, the amount of flexibility you have in your schedule and overtime requirements will vary based on your employer and industry. Still, the Economics Policy Institute found that, as a whole, salaried workers are more often able to change when they come in and when they leave the office. More salaried workers also reported it is "not hard at all" to take time off work compared to hourly workers at most income levels.

Unfortunately, flexibility is not always a good thing. Judith Warner, senior fellow at Center for American Progress, points out that employees with flexible arrangements don't necessarily work fewer hours or have less stress. Employers that offer flexibility also may expect employees to drop personal commitments or give up personal days when business picks up or gets busy.

Salaried employees with flexible hours also may be required to work from home and answer emails at wee hours to make up for time lost. More salaried workers reported that they work overtime, both mandatory and nonmandatory, compared to hourly workers.

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