Salary Or Hourly Pay? What’s The Difference And Which Is Better?
The Fair Labor Standards Act (FLSA) governs most of the workers in the United States and categorizes jobs as exempt and nonexempt.
Nonexempt workers are eligible to receive overtime wages, which are 50% higher than the regular pay rate offered for any particular job, for any hours beyond 40 worked in a single week. Exempt employees, on the other hand, are not eligible to receive overtime pay.
What Makes You Exempt?
If you make at least $455 per week ($23,660 per year), are paid on a salary basis, and perform exempt duties that need you to make choices and require independent judgment at least 50% of the time, you are considered exempt.
For instance, an employee who is given managerial duties will most likely be exempt, therefore, no matter the hours he/she works, their employer does not have to pay them overtime charges. Due to the nature of the FLSA, one cannot negotiate whether a job is exempt or nonexempt. It is the duties of the job performed by you that determines your job category, not the title of it.
The Benefits of Salary Vs. Hourly Wages
A salary gives the worker a sense of security. Every time a paycheck arrives, it will be the same – at least until the terms are renegotiated. An annual wage is a term of your employment, so your employer cannot decide to pay you less all of a sudden. This is one of the biggest benefits of receiving a salary because employers can easily cut nonexempt hours, but renegotiating a salary is more complicated.
On the other hand, salaried workers often find themselves working for longer hours without receiving any additional compensation. They are given certain responsibilities and tasks that must be completed, and this can often mean working longer hours or even on the weekends. This makes it hard for them to have personal time or separate themselves from their work.
As a non-exempt employee, you will be compensated for all the hours you work. If an employer wants you to work for longer than usual, they have to pay you more.
According to labor laws, overtime pay should be time and a half. Certain employees pay double for holidays but that isn’t compulsory (unless your contract specifically states so). This means that if your field of work is one where you get paid well and there is lots of overtime, you can earn more money than if you received a salary for doing the same job.
Hourly-wage workers also have another benefit of being able to keep their work and family lives separate. Once the work hours are over, you do not have to think about it anymore. This makes it easier to focus on things like family, fun, or even a second job.
Considering the disadvantages, the biggest is that hourly workers are more vulnerable to losing all or part of their income at the will of the employer. If the business is facing a downward trend, it’s the hourly workers who are impacted first as the owner would rather cut down some of your hours instead of cutting out an entire salaried position.
Hourly-wage workers also may not receive healthcare coverage, which is mandatory for all salaried workers. The law requires businesses with 50 or more employees to provide health care to all those who work 30 or more hours. Therefore, some businesses limit hourly workers to fewer than 30 hours to avoid the mandate.
The Bottom Line
There are pros and cons to being an hourly worker or being a salaried worker, but the latter is most often seen as the better of the two. This is because salaried employees enjoy more benefits such as job security, paid leave, health care, and other employer-sponsored benefits.
Hourly workers do not receive most of these, especially not paid leave. Health care may also be up to them to take care of. However, hourly workers have more freedom to choose their own hours and focus on personal time instead of being “married” to the job.