08 Nov What are the differences between an hourly employee and a salaried employee?
An hourly employee is paid by the hour, meaning that their paycheque will be a summation of how many hours they have worked over a certain period. Conversely, a salaried employee is compensated a fixed amount, where the hours worked do not factor into the amount on their paycheque. Their paycheque can be given weekly, monthly, or even bi-weekly, depending on the method the employer prefers. This is the main, and potentially obvious, difference between the two types of employees, however, these two payment methods have distinctive consequences.
Employees who are paid by the hour get to experience more autonomy in the workplace. There is more opportunity to work for more than one employer or even schedule more free time. Receiving hourly pay allows the employee to plan their preferred work-life balance more freely.
The advantages to hourly pay include:
- Entitlement to overtime pay once exceeding 44 hours,
- Opportunity for time and a half (compensated more on holidays),
- Greater flexibility in work schedule.
However, hourly pay comes with certain disadvantages. These may include a greater vulnerability to the economy, and a lesser chance of receiving benefits like vacation pay or sick leave. Whether an hourly employee receives benefits is strictly up to the policies the employer has in place.
Employees who are paid on a salary basis already know how much they will be compensated per year. Even if the employee worked 80-hour weeks, it would not change how much they are being paid. Yet, having a fixed salary can come with a lot of security and benefits which could make this payment method more desirable.
The advantages include:
- Entitlement to benefits (for example, dental care, free gym membership etc.),
- Stability of steady income flow,
- Can receive paid time off (vacation days, sick days, pregnancy leave etc.),
- Chance for promotions and salary increase.
Even though these benefits sound great, there are still limitations when being compensated on a fixed salary. As stated previously, a fixed salary means that even if you work greater than eight hours per day, you will still be compensated the agreed payment. Further, although salaried employees can receive paid time off, there is still a chance that work will be mandatory on some holidays (without additional pay). And lastly, there is less autonomy for salaried employees than hourly employees. This could result in less leniency for the employee to create their own schedule or work for more than one employer.