Salary or hourly wages: Which is right for you?
The differences between being a salaried or hourly employee and the pros and cons of both.
Let’s talk money. We all want to get paid more. But what’s the best way to get paid?
When you’re looking at a job description, would you rather see an annual salary figure or an hourly wage? What’s the main difference, anyway?
It’s tough to figure out which form of compensation is right for you. Salaried workers face pros and cons; hourly workers face pros and cons, too. So, let’s dive in and explore the upsides and downsides of both.
Benefits of hourly pay
More hours = more money
Hourly employees are paid for the time they work — no exceptions. If your employer wants you to work more time, they have to give you more money. And if you work more than a certain number of hours, you’ll earn overtime. Working a holiday could get you a heck of a windfall; many employers pay double-time during the festivities. Before accepting a new hourly position, ask your hiring manager about overtime and holiday policies. Make sure they are part of your contract. If you're in a well-compensated field with lots of overtime, you could make more than if you earned the same official pay on a salaried basis.
Work stays at work
If you’re an hourly worker, you get paid when you’re working. When you’re not working, you don’t get paid. Simple. Work can’t follow you home and creep into your free time. Salaried workers don’t benefit from the neat compartmentalization you get from punching a timecard. Their pay isn’t based on time. It’s more like they’ve entered into an agreement with an employer to get work done — regardless of how much that work might balloon.
Downsides of hourly pay
Your pay won’t be consistent
Being paid hourly can potentially make your job or income more vulnerable. If a company goes through tough times, your hours could get cut. For a salaried position, you get paid what you get paid — you can count on your check as surely as you count on the sun rising in the morning.
You may get fewer benefits
In the United States, the Affordable Care Act requires employers with 50 or more employees to provide health insurance to employees who work 30 or more hours a week. Some businesses cut employee hours under 30 to avoid paying for insurance. If you’re going into a new job that pays by the hour, talk to the hiring manager about full-time vs. part-time status, and ask for a detailed explanation of the benefits the business offers.
Benefits of salaried pay
You get paid what you get paid — period.
A salaried employee is paid regularly and at the same rate each pay period. Your monthly salary is your monthly salary is your monthly salary, regardless of whether you work 40 hours or 30 hours or 10 hours — in which case, please let us know if your company is hiring! Does your company close for the holidays? You’ll get paid. Does your company have to take a day off because of the weather or an event or whatever? You’ll get paid. There's comfort in that consistency.
You’ll likely get better benefits
Full-time salaried employees are also more likely to receive benefits, including health care, retirement contributions and paid vacation time.
Downsides of salaried pay
More hours = same pay
If you’d prefer to work a set number of hours, salaried positions might be a challenge. That’s not to say that salaried employees have no boundaries whatsoever. But they often work after hours or extra hours during the day, regardless of how many hours they have worked that week already. There is no cap, and worse, there’s no additional compensation for more work.
Less control over your time
Which holidays you work, when you put in extra hours, how much time you have left to work on your hobbies or even a side hustle — all that’s out of your hands. If the business is running and your manager needs you, you’re working. The demands of a full-time salaried position can be a lot to juggle, especially if you have other responsibilities. You’re trading flexibility for the assurance of consistent pay.
Comparing salaries to hourly wages
If your salaried position was paid hourly, would you make more or less? And if your wages were paid out as a salary, what would you make?
For example, the average annual salary for a customer service representative is $59,000, while the average wage for the same position is $17 an hour.
The bottom line
Each form of compensation comes with its pros and cons, but you may find that one works better for you. It's important to consider your desired job field and the type of work you'll be doing before deciding whether salary or hourly pay will provide the fairest compensation for your efforts.