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When you are deciding whether to pay your employees a salary or an hourly wage, you need to understand all of the differences. Workers who receive a salary get a set amount of pay no matter how many hours they work. Hourly workers, on the other hand, are paid for the number of hours they work, regardless of what they do during that time. There are pros and cons to both options, so it is important to understand when each one makes sense. 

Salaried Employees

Salaried employees make a specific amount of money each year, and it is split over the pay periods throughout the year. Whether they work 20 hours or 60, they make the same amount of money. It is easier to plan for and process your payroll when you have salaried employees, and many employees actually prefer knowing how much money they are going to make.

However, you will pay them more if they work less than 40 hours a week. You also pay them the same rate when they arrive late or leave early. It is important to make sure that you have salaried employees who won’t take advantage of the way they are paid. 

Hourly Employees

Hourly employees are paid for the hours they work. However, if they work more than 40 hours, they usually get paid time and a half. You can pay them the same way that you pay salaried employees, but their paychecks will vary depending on how many hours they work. 

One of the benefits of having an hourly employee is that they do not need to be full time. This means that you don’t have to offer them benefits, such as health care or paid time off. However, you will have to pay overtime if they work more than 40 hours a week. You need to have a time clock or some other way of knowing how many hours they work.

Which Is Better?

You need to consider different factors, such as how often the employee works, your state’s laws, and the cost of benefits packages. If you have an employee who works full time and is important to the business, you may want to consider making them a salaried employee. However, if you need someone for different hours each week, you might consider an hourly employee.