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

The Fair Labor Standards Act (FLSA) governs most jobs in the United States, categorizing them as either exempt or nonexempt. If you are nonexempt, you are owed overtime wages 50% greater than your regular pay rate for any hours over 40 worked during a single week. Overtime pay is not given to exempt employees.


Salaried vs. Hourly Pay: An Overview

What makes you exempt from having to work overtime is your current job status. An employee has to make at least $684 per week ($35,568 per year), be paid on a salary basis, and perform exempt duties that require discretion and independent judgment more than 50% of the time in order to be classified as exempt. You can be paid a salary instead of hourly wages if you take on managerial duties, meaning your employer doesn’t have to pay you overtime no matter how many hours you work. The job category of exempt or nonexempt cannot be negotiated and is determined by the duties performed, not the job title.


How Does a Salary Work?

If you earn a salary, each time your paycheck arrives, it will be for the same amount. The amount you will be paid each year is part of your employment agreement and will remain your salary until you leave or renegotiate the terms of your contract. An implicit cost is present. However, there can be a downside. Although 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. When work and personal time are separated, it can be more difficult in some circumstances.


How Does Hourly Pay Work?

If an employer wants more of your time, they have to pay you more; you are an hourly employee and should be paid for all the hours you work. It is not mandatory for employers to pay double time for holidays unless it is part of a contract that covers your job. If you’re in a well-compensated field with lots of overtime, there is also a lifestyle aspect to consider. If you were paid on a salary basis, you could bring home more money. Hourly employees will generally find it easier to balance their work and home life if their employer is flexible with their hours. The employees who are paid hourly often feel the impact of changes in the law or tough times for the company more acutely than other employees. They can focus on family, hobbies, or a second job after work. Hourly employees may be protected from having their hours reduced or their position eliminated during difficult economic times by a union. Some businesses keep hourly employees to fewer than 30 hours to avoid the healthcare mandate for businesses with 50 or more full-time employees.

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