Salary vs Hourly
Decisions on How to Compensate Employees
Determining whether to compensate employees on a salary or hourly basis is a critical decision that can have significant implications for your organization. The determination of a job’s FLSA (Fair Labor Standards Act) exemption status is key to know if hourly or salary pay is appropriate. All Exempt level employees are to be paid on a salaried basis. Exempt level jobs and the employees performing those jobs, are provided a base rate to complete the responsibilities assigned. Non-exempt jobs will normally be paid on an hourly basis. However, even though a person is in a non-exempt job, your payroll system may pay the employee on a salaried basis assuming a 40 hour work week. Note: Timecards will need to be completed for each person performing non-exempt work.
Salaries Bring Stability
Those employees with a salary paycheck typically will have more stability in the amount of pay they received each month. This structure is often preferred for roles that require a high degree of responsibility, flexibility, and long-term commitment. However, it can also lead to challenges such as managing expectations around workload and overtime. We help you weigh these factors and determine whether a salaried approach is appropriate for your organization.
Flexibility and Control with Hourly
On the other hand, hourly pay (for non-exempt roles) can offer greater flexibility and control, particularly in industries where work hours may vary significantly. It allows you to align compensation more closely with the actual hours worked, which can be beneficial for both budgeting and labor cost management. For hourly jobs, a timecard needs to be submitted in order to determine if overtime is worked. This is a legal requirement under FLSA ruling. If an employee works over 40 hours in any particular work week, pay at 1 and ½ times their hourly rate is required. Our team provides guidance on best practices for implementing and managing hourly pay structures, ensuring that your approach is both compliant and effective.
