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Hourly v. Salary Pay

On Behalf of | Mar 20, 2019 | Firm News

When accepting a job offer, or even a promotion, you need to understand the differences between being compensated on an hourly versus on a salary basis. Both payment methods offer their own individual benefits to an employee and have their own advantages and disadvantages depending on the employee’s circumstances.

What Is A Salaried Employee?

When an employee is paid a salary, that employee receives a fixed amount throughout the year on a fixed schedule of weekly, biweekly, or monthly payments. For example, an employee salaried at $65,000.00 a year will receive a weekly payment of $1,250.00. In addition, a salaried employee often receives additional employment benefits. These benefits may include 401k or 403b accounts, paid time-off (vacation, sick, and/or personal time), short-term disability, medical and dental insurance, and life insurance. Thus, salaried employees receive the benefit of a steady paycheck and employment benefits.

However, a disadvantage to being a salaried employee is the inability to receive overtime. This is a noteworthy disadvantage as, at times, salaried employees will have to work in excess of forty (40) hours without additional compensation.

What Is An Hourly Employee?

Unlike salaried employees, hourly employees are paid based on the number of hours worked. In addition, hourly employees must be paid the federal, state, or local minimum wage, whichever is greater.

Furthermore, hourly employees are entitled to one-and-a-half times their normal rate for hours worked over forty (40) in one workweek. Specifically, an hourly employee in Rhode Island, who earns minimum wage, is eligible to receive $15.75 per hour if they work in excess of forty (40) hours in one workweek. According to Rhode Island law, hourly employees can benefit from premium pay, in the amount of 1.5 times their rate of pay, if they work on Sundays and/or holidays. However, not every employee is covered by the Fair Labor Standards Act (“FLSA”), which means that certain employees are exempt from overtime and premium pay. According to FindLaw, a typical exempt employee is one who performs supervisory or executive duties and is paid on a salary of at least $455.00 per week. Therefore, if an hourly employee is not exempt and his/her employer falls under the FLSA’s overtime provision, then that hourly employee enjoys the benefit of collecting overtime compensation.