Salary vs. Hourly Pay: What's the Difference?

Salary vs. hourly pay: What's the difference? Salary vs. Hourly Pay means Salaried employees are usually not paid based on the hours they work; instead, they are paid the same amount each pay period, based on their total salary. An hourly worker, on the other hand, earns a set payment for each hour they work.

Salary vs. Hourly Pay: An Overview

What makes you exempt? In general, an employee has to make at least $455 per week ($23,660 per year), be paid on a salary basis, and perform exempt duties that require discretion and independent judgment at least 50% of the time. If you take on managerial duties, for example, you’re probably exempt. This means you can be paid a salary, so no matter how many hours you work, your employer doesn’t have to pay you overtime wages. Because of the FLSA, you can't negotiate whether a job is exempt or nonexempt. Regardless of job title, it's the duties you perform that determine your job category.

Salary

Each time your paycheck arrives, it’s the same. An annual wage is a term of your employment, and that’s how much you will receive for as long as you hold the same job or until the terms are renegotiated. It is a type of implicit cost.

 A salary comes with an inherent sense of security. Employers can cut nonexempt hours easily, but renegotiating a salary is more complicated.

There can be a downside, though. While salaried employees receive a fixed rate of pay, they also have specific responsibilities and tasks that must be met or completed—even if that means longer hours and occasional weekends. In some circumstances, this can make it more difficult to separate work and personal time.

Hourly Pay

As an hourly employee, you are paid for all of the hours you work. If an employer wants more of your time, they have to pay you more. Legal overtime is time and a half; some employers may pay double time for holidays, but that isn't mandatory unless it's part of a contract that covers your job. If you're in a well-compensated field with lots of overtime, you could bring home more than if you earned the same official pay on a salaried basis.

 

There's also a lifestyle aspect. In general, hourly employees will find it easier to separate home and work. Once work is over for the day, they can concentrate on family, hobbies, or a second job.

The Bottom Line

There are pros and cons to being hourly versus a salaried employee but for the most part, the latter enjoy more benefits, such as paid leave and other employer-sponsored benefits. Hourly workers do not usually receive compensation in the form of paid leave by the companies who hire them and are responsible for their own healthcare. Hourly employees enjoy more autonomy and may be able to set their own hours.