Salary vs Hourly Pay: What Are the Key Differences?

Less than half of the US workforce is on salary pay. Between the two types of pay, the majority of employed people work for an hourly rate.

It makes sense because most part-time employees receive an hourly wage and this includes a lot of young people working to put themselves through school to aspire to salaried employment. But what exactly are the differences between the two?

Do you know the key differences when comparing salary vs. hourly pay? Keep reading to learn the pros and cons of each type of employment.

Differences Between Salary vs. Hourly Pay

Before you take a job or hire employees for your own business, it’s important to understand the differences between these two types of payments so you get the most bang for your buck.

Salary Pay 

When employees are “salaried employees”, they receive a set amount of money per year which is predetermined before beginning a job. That amount is broken up into payment periods, usually either weekly, bi-weekly, or monthly.

For example, an employer may offer an employee a salaried position making $50,000 a year. That amount would be broken up into 52 weekly payments.

The employee will only make that amount of money no matter how many hours over 40 he or she works. While there are exceptions, normally there is no overtime for working more than 40 hours a week.

Salaried employment is often accompanied by benefits like health insurance, 401K, short-term disability, and paid time off.

Hourly Pay

Hourly employees are paid an hourly rate, not lower than the federal minimum wage, for each hour they work. They are entitled to one and a half times their pay for working more than 40 hours per week.

Hourly employees are not entitled to benefits like paid time off or other benefits.

Pros and Cons of Salary vs. Hourly Pay 

The obvious upside to being a salaried employee is the consistent paycheck. Add to that the benefits, paid time off, sick days, and career advancement opportunities and it sounds like a win-win situation.

Of course, there are some cons. You can end up working a lot of hours with no additional pay. There’s the potential to work even when you’re on vacation or over a holiday.

The advantages of hourly pay include overtime and holiday pay and some leeway with your schedule. The downside is you’re more vulnerable in a down economy and you don’t receive any paid time off or sick days.

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Salary vs. Hourly Pay 

Now that you know the key differences in salary vs. hourly pay and the pros and cons of each, which do you think is better for you and your situation? There’s no straightforward answer because each has its benefits.

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