If you’re looking for your first job or considering a career change, you may be wondering: what exactly does a salary mean? What does it mean to be a salaried or hourly worker? Having a good understanding of how salary works will make it easier for you to know what exactly to expect as a salaried employee.
If you have been confused about all these terms and are not sure which is better; salary or hourly pay, this article will give you all the answers you need. Furthermore, we will give some useful tips to help you calculate and negotiate your salary as a salaried worker and explain some of its benefits.
So put on your best suit (or at least get dressed), grab an espresso, and let’s dive into the world of salary negotiation!
What’s a Salary?
A salary is a fixed amount of money paid to an employee for services rendered. It’s not dependent on the number of hours worked or sales made – salary is given out regardless of these factors. In contrast, bonuses usually come in addition to regular salary payments and are based on variables like performance and sales.
For instance, you might receive a bonus when your company does well financially (in which case it would be called an incentive bonus) or when you hit certain sales goals (in which case it would be called commission).
Who Is a Salaried Employee?
The first thing to know is that a salaried employee is paid a fixed amount of money each pay period, regardless of the number of hours worked. Payment schedules can be weekly, biweekly, semimonthly, or monthly.
Depending on their agreement with their employer, a salaried employee is usually based on a 40-hour workweek. However, they may be less than 40 hours in a given week.
This fixed amount earned by a salaried employee does not change based on how many projects they complete or sales they make. When you’re hired as a salaried worker, your salary will be determined by your role and company policies, not by whether or not you actually have time to get everything done.
Who Is an Hourly Employee?
An hourly employee is someone who is paid based on the hours he or she works. If you’re an hourly employee, you’re likely paid a fixed amount for each hour worked – sometimes called your base pay.
In addition to this base pay, you’ll be compensated for any overtime that you work. The rate at which your employer will typically compensate you depends on how many hours in a week are considered “overtime.”
An hourly employee can also be paid at the same frequency salaried employees are paid, but their paycheck will fluctuate based on the number of hours they were able to work.
What Are the Pros of a Salary?
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Consistent pay
This is probably the most obvious benefit of a salary over an hourly pay. You will enjoy a high degree of consistency in your earnings. As a salaried worker, you would already know how much you will be receiving over the course of a period – it could be monthly or annually. That way, it will be easier to make budgets on your income.
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More financial security
More like the first pro, getting a specified amount of income for each month can give you a sense of security. You will know that you have a reliable paycheck that can give you peace of mind and ease off any financial stress.
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Better benefits
Salaried employees have a higher tendency of more in the way of employee benefits. You can be paid much more than your salary in terms of employer health care, paid holiday time, and pension contributions. Other perks could include childcare reimbursement, gym membership, or paid maternity/paternity leave. All these can help you live a more comfortable life even when your salary is low.
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Higher perceived status
Working as a salaried employee can help you achieve some status. Having a more professional work history can help you find future career opportunities. This benefit may not be available to an hourly employee.
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More growth opportunity
Many salaried jobs will allow you to bear some responsibilities that will cause you to develop new skills, which could be beneficial when considering making a career switch. Working as a salaried employee will also give you a good chance of getting promoted within the company, hence earning more money.
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High stability
The stability of a salaried position means that if your company goes under and cannot pay its employees, other jobs will still be available for you in the industry.
Cons of Working as a Salaried Employee
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Usually unable to earn overtime compensations
Most salaried employees don’t get the chance to earn overtime compensation. But for an hourly worker, you can work more than 40 hours in a week and get paid well for overtime. Many businesses will even pay you almost half of what they pay you hourly for overtime, making it more lucrative to work as an hourly employee than salaried.
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You may be expected to work long hours
This is especially true in a company where the work culture is more about ‘presentism’ – where you are expected to finish a task no matter how much time it takes you. This often means working extra hours with no pay.
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It can be harder to separate work and personal life
Since you will be required to finish your work no matter how long it takes, you may need to work at home or late. This may make it harder to balance your job and personal life. This can make you lose a sense of satisfaction in your job because it is already cutting away your ability to enjoy life and be with your family and friends.
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High risk of pay cuts
When times are rough for your company, there is a high tendency to have your salary cut during a time of financial difficulty. At the same time, you may get fired during the time.
What Are the Pros of Being An Hourly Employee?
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Overtime
Unlike salaried workers, hourly employees get paid for working extra time in addition to their ‘normal’ working hours. That means if the agreed work hours is 40 hours per week and you worked three hours overtime, your employer will pay you for the three extra hours. That is not something available to a salaried worker.
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Holiday pay
Although hourly employees don’t have the privilege of some benefits salaried workers enjoy, they can get paid for working on certain holidays. This can quickly add up to mean good money for an hourly worker.
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Quicker payments
Working as an hourly employee means you will likely be getting your money quicker than a salaried worker. Most hourly workers are paid on a weekly basis. That means you don’t have to budget for a long time like salaried workers do before they are paid.
Cons of Hourly Pay Rate
Working as an hourly employee can be frustrating and frustrating sometimes. Here are some cons of working as an hourly employee:
- The first thing to know is that you will not have benefits. Hourly employees don’t get health insurance or paid time off. If you have dependents, you are responsible for their medical bills after you’re laid off.
- Another downside is that you aren’t guaranteed a job for life. Hourly employees may be fired at any time for any reason—including if they don’t meet quotas or quotas are lowered—or if management decides to make changes in the workplace. -You don’t get any benefits or company perks.
- Hourly workers often have to work long hours and weekends in order to meet deadlines, and deadlines are rarely flexible enough to accommodate last-minute changes or emergencies.
Tips for Negotiating Your Salary
When the time comes to negotiate your salary, you should be prepared. Here are some tips for negotiating your salary:
#1: Have a plan
Before entering into negotiations, know what kind of offer you’re looking for and what type of job offers would make you happy. Also, decide on how much more than that amount is too much. This will help keep you from being sidetracked by other offers later in the process.
At the same time, it will help ensure that when an opportunity arises that meets all your requirements and goals (a dream job), you won’t feel pressured into accepting an increase above what’s comfortable for you just because everyone else around seems to be getting raises or bonuses.
#2: Research the job title and ask questions!
You should start by looking at similar jobs in your field and finding out what they make. Don’t forget to ask what they’re looking for in their new hire. This will help you set a range of acceptable salaries for yourself.
#3: Ask questions
If there’s something about the job title or company that doesn’t seem right, make sure to ask about it before deciding whether to accept an offer. For example, if the job title “project manager” sounds generic and doesn’t reflect how much responsibility you’d have in a given position, don’t be afraid to ask why they chose that title over another one that better describes what you can do for them.
#4: Know your worth
It’s important to know what you’re worth. You can do this by looking at the average salary for your position and then comparing that figure with your own experience and credentials. Once you’ve narrowed down the range of salaries for your job, ask for more if you think you deserve it!
#5: Set your range
Don’t let anyone pressure you into accepting less than what’s fair—even if they say they need it today (or tomorrow). You deserve compensation equal to or greater than what other candidates are getting for similar positions. And remember: The more time that goes by before making a decision, the less pressure there will be on either of us!
#6: Be polite but firm
Be polite yet firm when discussing your salary expectations with your potential employer, and make sure that your request is backed up by evidence from past positions or personal experience (i.e., internships). If they say something below what you want to make, don’t say “yes” immediately. Let them refine it until they reach an agreement that works for both of you.
FAQs
Salary vs hourly pay; what’s the difference?
The difference is simple. With salary, you get a set amount of pay every year – this can be divided across the individual months. You will be getting that amount for every paycheck you receive regardless of how many hours you work during the week.
On the other hand, hourly pay refers to the pay you get for every hour you work. If your employer wants you to work more than the agreed hours, they will have to pay for the extra hours.
How can I calculate what my overtime pay should be?
If you are working hourly and think you have worked some extra hours, there is a way you can determine how much you should get for the additional hours worked. To get that, you will multiply your regular hourly rate by 1.5 and then by the extra time worked.
That means regular hourly pay rate x 1.5 x overtime hours worked. That will give you an idea of how much you should request for overtime.
If I am paid on a salary basis, can I still be entitled to overtime?
The answer is yes, but it has a condition. You can only get paid for overtime if you are a salaried worker that earns less than $34,000 or $700 per week and works more than 40 hours a week.
What is the difference between exempt and nonexempt employees?
The major difference between the two is that exempt employees are not entitled to get paid overtime for extra hours worked. But a nonexempt worker can be paid overtime when they work more than the agreed work hours.
Conclusion
You might feel like there’s so much information out there about salaries and paychecks or that you don’t know enough to negotiate with your employer. But it’s pretty simple: salary is the amount of money an employee makes per year.
On the other hand, hourly employees can count on being paid for every hour they work (with some exceptions). But remember that just because one type of employee might have more benefits than another doesn’t mean you have to choose one over the other. The best option for you will depend entirely on your specific situation!
