Salary vs Hourly Employees

When it comes to accounting and payroll management, you need to understand the differences between hourly and salary employees. After all, you’ll need to stay compliant when it comes to how they get paid and how their work hours are tracked. 

Hourly Employees

 Making up approximately 58% of the US workforce, hourly employees are paid based on the number of hours they work. They receive a set hourly rate, and their wages are calculated by multiplying this rate by the number of hours worked.  

Hourly positions allow for:  

Flexible Work Schedules

When workload tends to ebb and flow based on the business’ needs, it makes sense to categorize a position as hourly. This flexibility allows employers to scale up or down based on demand, which can be helpful in managing labor costs. 

From the employee perspective, a flexible schedule means the freedom to adjust work hours to accommodate personal events, obligations or hobbies. 

Overtime

 Most salaried employees are not paid overtime, regardless of how many hours they work in a week. By contrast, hourly employees are entitled to overtime pay. The federal Fair Labor Standards Act (FLSA) outlines that compensation must be 1.5 times their regular hourly rate for any hours worked beyond the standard 40.  

Overall, the hourly model incentivizes employees to take up extra shifts if their workplace experiences a coverage issue or surge in demand. 

Salary Employees

Salary employees receive a fixed annual or monthly paycheck, regardless of the number of hours worked. While they may work more or fewer hours than their contracted amount, their compensation remains consistent.  

Salary positions allow for: 

Consistent Pay

 Salary employees enjoy a predictable income, as their compensation is not directly tied to hours worked. This stability can be appealing to employees who value a consistent paycheck and don't require additional compensation for overtime hours. A steady paycheck also means there’s no need to rely on shift-availability to reach desired hours. 

Focus on Results

Unlike hourly employees, salary employees are typically evaluated based on their overall job performance rather than the number of hours worked. This approach allows for a greater emphasis on achieving big-picture goals and objectives. 

Managing payroll for both hourly and salary employees requires attention to detail and adherence to legal regulations. At Future Systems, our payroll and timekeeping solutions help streamline this process and avoid costly errors. Reach out for a quote today!