The Fair Labor Standards Act (FLSA), which governs the majority of employment in the country, divides them into exempt and nonexempt categories. If you are nonexempt, you are entitled to overtime compensation that is 50% more than your usual pay rate for any hours beyond 40 in a single workweek. Overtime compensation is not paid to exempt workers.
Overview of Salaried vs. Hourly Pay
Why are you an exception? An employee must typically earn at least $684 per week (or $35,568 annually), be paid on a salary basis, and perform exempt responsibilities that call for discretion and autonomous judgment at least half the time. You are probably exempt if you take on supervisory responsibilities, for instance. Thus, regardless of how many hours you work, your employer is not required to give you extra payments if you are paid a salary.
You cannot negotiate whether a position is exempt or nonexempt according to the FLSA. Your work category is determined by the responsibilities you carry out, not by the title of your position.
How Does a Salary Work?
When you get paid a salary, your paycheck always contains the same amount. Your employment has a yearly pay as a term; you will be paid that amount for as long as you keep the same work or until the terms are changed. This kind of expense is implicit.
There could be a drawback, however. While salaried workers are paid at a certain rate, they also have specified obligations and duties that must be fulfilled, even if that necessitates working longer hours and sometimes on the weekends. This could make it more challenging in certain cases to keep work and leisure time separate.
A feeling of security is innately present with an income. Employers may easily reduce a nonexempt employee’s hours, but wage negotiations are trickier.
How Does Hourly Pay Work?
As an hourly worker, you get paid for each and every hour that you put in. If your employer wants more of your time, they must pay you more. Time and a half is the legal overtime rate; some employers may pay double time on holidays, although this is optional unless it is stipulated in a contract that pertains to your employment. 1 Your take-home pay may be higher if you put in a lot of overtime in a well-paying career than it would be if you were salaried and earned the same official wage.
A lifestyle component is also included. Hourly workers will often find it simpler to keep work and home separate. After the day’s work is done, they may focus on their families, hobbies, or a second career.
Unfortunately, receiving hourly pay also increases your vulnerability. Hourly workers often experience the effects of new regulations or difficult times at work first. Employers find it simpler to reduce your hours temporarily when business is slow than to completely axe a paid post. A union that represents hourly workers may provide some protection from some of these dangers.
Additionally, eligibility for healthcare coverage may be impacted. Some firms limit the number of hours hourly workers work to less than 30 hours in order to circumvent the law that employers with 50 or more employees must offer healthcare to full-time employees, who are defined as persons working 30 or more hours.
There are advantages and drawbacks to both salaried and hourly employment, but in general, salaried employees get greater perks including paid vacation and sick days, retirement plans, and other employer-sponsored benefits. Hourly employees may be responsible for their own healthcare and often do not get compensation from their employers in the form of paid time off. Hourly workers, on the other hand, have greater freedom and may be able to choose their own working hours.