Whether you compensate a role with an hourly wage vs. The outcomes are often scalable, so revenue doesn’t correlate with hours worked, and workers may be more likely to seek full-time roles with steady paychecks and benefits. Norms exist in many industries to dictate whether a role is salaried or hourly.įor example, hourly wages are common in the service industry, where a worker’s on-site presence is a necessary contribution, the amount of work available fluctuates in line with the amount of revenue coming in and many workers are seeking less than full-time positions.īy contrast, in many roles classified as knowledge work, the employee’s contribution isn’t about time but about outcomes or deliverables. Hourly employees can also be employed part-time, which may mean they don’t expect benefits, such as health insurance and retirement plans. Employee compensation fluctuates with the amount of work they do, so you can adjust your costs based on revenue. The biggest benefit to hourly wages is cost savings for employers. Having mostly or exclusively salaried workers also stabilizes your payroll, so costs will remain the same regardless of how much or how little business you do. The greatest benefit of paying employees a salary is attracting more senior workers, who tend to expect a stable paycheck and benefits. The financial resources you have allocated for the outcomes you want from the role.How similar roles are compensated in the job market.How the employee’s contribution is measured, such as being present versus business results.Decide which compensation type makes the most sense for each role based on the responsibilities and experience required. You can hire a mix of employees with some paid hourly and some paid salary. It doesn’t mandate overtime pay for holidays or other off-shifts as long as those are included in the 40-hour work week, but many employers offer additional pay for these shifts. The FLSA requires nonexempt to employees be paid at least 1.5 times their hourly pay for any time worked beyond 40 hours in a week (colloquially called “time-and-a-half”). Most hourly workers are classified as “nonexempt” under the Fair Labor Standards Act (FLSA), which also sets the federal minimum wage and other worker protections. They don’t include other types of compensation or benefits that might be available for the employee such as health insurance or retirement.īoth full-time and part-time employees may be paid hourly. Like salary, hourly wages are a base pay rate for an employee. Hourly wage employees must be paid the federal or state minimum wage rate, whichever is higher. Instead, an employer pays an employee based on how many hours they work each pay period, which might be a week, two weeks, half a month or a month.
A role that’s paid hourly doesn’t come with a set or target annual pay. An hourly wage is the amount an employee is paid per hour they work.
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