There is a lot of debate surrounding salary vs. hourly jobs. Which one is better, what are the benefits of each, and which one should you choose? To answer these questions, we must first understand the main differences between the two.
In this article, we’ll discuss the pros and cons of each option. So, buckle up, and let’s get started.
4 Key Differences
To make a clearer hourly vs. salary employee distinction, let’s take a look at the most important differences between the two types of employment:
|
Salary |
Hourly |
|
| How you are paid | Fixed payment | You get paid by the hours you work |
| The number of hours you work | More or less than 40 hours per week | 40 hours a week (on average) |
| Overtime pay | No | Yes |
| Employee benefits | Healthcare coverage, paid vacation | Double wages for working on holidays |
How You’re Paid
As you can see from the table, the most apparent difference between hourly vs. salary jobs is how you get paid.
A salaried employee receives a set amount of money weekly, biweekly, or monthly, while an hourly worker gets paid by the hour.
This means that salary workers receive a regular paycheck regardless of how many hours they work in a week, while hourly workers only get paid for the hours they’ve worked.
- How does salary pay work? Salaried employees get contracts that outline how much and often they will get paid.
A full-time salaried worker generally works 35 to 40 hours, with a typical daily routine of seven to eight hours.
- How does hourly pay work? Hourly workers have a fixed hourly rate for each hour worked during their pay cycle. To calculate your total wage, multiply your hourly rate by the number of hours worked during a pay period.
For example, if you earn $15 per hour and work 20 hours in a week, your total wage for that week would be $300.
The minimum wage for hourly workers on a Federal level amounts to $7.25 per hour. However, each state has its own basic minimum rate.
The Number of Hours You Work
The next big difference between salary vs. hourly pay is the number of hours you work. Salary workers typically work around 40 hours per week, while hourly workers can work as little or as many hours as they want.
This flexibility is one of the main reasons why people choose to work hourly jobs. If you need to take a day off, no problem. On the other hand, salary workers often have to use vacation or sick days if they want to take time off.
Overtime Pay
One of the biggest disadvantages of salary jobs is a lack of overtime pay. If you’re a salaried worker and work more than 40 hours a week, you’re not entitled to any extra compensation.
On the other hand, hourly workers are typically paid time and a half for each hour worked over 40 hours. For example, if you work 50 hours a week, you’ll get paid for the 40 regular hours plus ten hours of overtime pay.
Main Perks, Benefits, and Disadvantages
There are many hourly vs. salary pros and cons, so let’s address the most obvious ones.
Salaried Employees Get Consistent Paychecks
Salaried employees receive the same paycheck every month, regardless of how many hours they work. This can be a big advantage for workers who have bills to pay and need a consistent income.
Salary Workers Receive More Employee Benefits
Regarding salary vs. hourly benefits, the former usually receive more employee benefits than the latter. Common examples of salary benefits are 401(k) matching contributions, health care coverage, and paid vacation days.
Salary Workers Have More Opportunities to Advance in Their Career
A salaried job entails more responsibilities than an hourly one. Although moving from an hourly to salaried position may initially require a pay cut, the long-term benefits are worth it.
Not only do salary workers receive additional benefits like health insurance, but they are also more likely to be promoted.
On the other hand, when comparing salary employee vs hourly employee career opportunities, the latter are often more limiting. Since they are usually at the bottom of a firm’s hierarchy, hourly workers might have problems with being promoted.
Hourly Workers Are Entitled to Holiday Pay
Hourly workers are often entitled to holiday pay, which is an extra premium that employers pay their employees on top of their regular wages. Employers may offer double or even triple pay for holidays like New Year’s Eve.
Hourly Workers Don’t Have a Set, Guaranteed Income
The main disadvantage of being an hourly worker is that your income is not guaranteed. If you don’t work, you don’t get paid. In fact, when it comes to salary vs. hourly employees, the latter are typically the first to have their hours reduced when businesses cut back, as opposed to salaried employees.
For example, someone who receives hourly compensation and is usually scheduled to work 40 hours each week could lose 25% of their regular wage if their employer decides to assign them 30 hours during slow weeks.
In addition, hourly employees can suffer financially if they miss their scheduled hours. For example, if you’re making $17.50 per hour and are 10 minutes late for your shift, you’ll lose $2.92 (before taxes).
What Jobs Are Salaried?
Now that you know the main disadvantages and benefits of salary vs. hourly pay, you must be wondering which industries commonly use each type of employment.
Typically, salaried employment entails greater educational requirements and additional responsibilities. Some examples of typical salaried jobs include:
- Lawyers
- Teachers
- Accountants
- Civil engineers
- Pharmaceutical researchers
- Financial analysts
What Jobs Are Hourly?
The majority of those who work in jobs that entail a lot of physical labor are paid by the hour. Some examples of hourly jobs include:
- Retail sales employees
- Construction workers
- Automotive service workers
- Waiters and bartenders
- Aircraft maintenance technicians
- Repair and maintenance workers
How to Calculate Your Salary/Hourly Pay
Now that we’ve gone over the salary vs. hourly wage distinction, let’s dip our toes into numbers.
Calculating Salary Pay
In general, your salary is set in stone. I.e., if you accept a $60,000-per-year job, you will make a total of $5,000 per month or $28.85 per hour throughout the year. Salaried workers usually don’t get paid for working overtime; however, they might get bonuses and commissions.
Calculating Hourly Pay
To figure out your yearly salary as an hourly employee, you need to calculate your hourly rate. For example, if you’re paid $17.50 per hour and you work 40 hours per week for 52 weeks, your salary would be:
$17.50 x 40 = $700 per week
$700 x 52 (weeks in a year) = $36,400 per year
What Type of Job Is Right for You?
The last thing we’ll discuss in this hourly employee vs. salary worker face-off is what type of job is right for you. The answer to this question really depends on your lifestyle and what you’re looking for in a job.
On that note, hourly pay works best for people who:
- Prefer a more flexible work schedule
- Want to receive overtime pay for working more than 40 hours per week
- Enjoy a higher income during busier times of the year
Conversely, salary pay works best for people who:
- Value job security and a consistent paycheck
- Prefer receiving employee benefits such as health care and paid vacation days
- Are looking for opportunities to advance in their career
Conclusion
Now that you know the difference between salary and wage, as well as all the pros and cons of each, you can decide which type of employment is right for you.
As you can see, there is no definite winner in the hourly vs. salary benefits showdown. So whichever route you decide to take, we hope this article helped clear up any confusion about salary and hourly pay.
FAQs
Is it better to get paid hourly or salary?
It depends on your priorities. Salary employment might be the way to go if you’re looking for a more stable job with opportunities to move up the corporate ladder. However, an hourly job might be a better fit if you’re looking for more flexibility and the potential to earn overtime pay.
What are the disadvantages of being paid a salary?
The main disadvantage of being paid a salary is that you may have to work long hours without receiving any extra compensation. In addition, salary employees are not typically compensated for working on holidays.
What is the difference between a salary and a wage?
A salary is a fixed amount of money an employee receives for working, regardless of the number of hours they work. A wage is an hourly rate that an employee earns for each hour they work.
Typical hourly jobs include retail sales employees, construction, and automotive service workers, while salaried jobs include lawyers, teachers, and accountants.
Another salary vs. hourly employment difference to consider is that salary employees usually don’t get paid for working overtime, while hourly workers do.
