Merits and Demerits of Hourly Wage and Salary Pay

Every field, company, and job is different, but generally, the following are the benefits and drawbacks of each pay structure.

Hourly wage

The benefits to being paid by the hour include the following:

·     Guaranteed a certain dollar amount for every hour you work.

·     Positions usually have a predetermined number of hours you’ll work.

·     If you’re asked to work more than 40 hours, you get paid overtime, which is time-and-a-half for each hour after the first 40 hours. For example, if your hourly wage is $12, you would be paid $18 for every hour past 40 hours in a week.

·       Some employers double your hourly rate if you’re asked to work holidays.

The drawbacks? If your place of business closes early or decides to cut back on hours, that means a smaller paycheck. The likelihood of that happening depends on the industry and the company. A 9-to-5 office job is likely to have a set schedule, whereas a job working in retail might fluctuate more.

Salary pay

The benefits to being paid a set salary include the following:

·       Guaranteed a certain dollar amount per paycheck.

·    Some companies offer salaried employees additional perks, such as vacation days or a more flexible schedule. For example, if you finish your work early, you might be able to take the afternoon off.

·       Often salaried positions come with a higher status and/or a jump on the pay scale.

·    Salaried employees might be happier, according to a study published in Personality and Social Psychology Bulletin. Researchers found that income didn’t affect happiness levels as much for salaried employees as for those paid hourly, who experienced a stronger relationship between income and happiness.

The downside is that if a salaried position demands more than 40 hours per week and working on holidays, you won’t get paid extra for your time.

In my case, there were no extra perks and no bump in pay. My hours were just as set as they were for salaried coworkers, maybe more so since my boss was reluctant to have me work overtime and have to pay time-and-a-half. I think in Joel’s case, it wasn’t such a good deal, either. If he was making $50,000 and working 60 hours per week, he made about $16 per hour. If he had accepted the other job offer at $40,000 and 40 hours per week, he would have make $19.24 per hour. He was working at a lower hourly wage, and he wasn’t even enjoying his job.

But in many cases, it can be a great thing, especially if you make more money, get extra benefits, and your company doesn’t expect 80-hour work weeks with no time off to compensate. If you’re given the choice between the two, whether at your company or when negotiating job offers, look at the whole package. Find out the average number of hours the job requires, calculate your hourly wage, and think about what your time is worth. (Even better: Compute your real hourly wage, since it’ll reflect hidden job costs, such as wardrobe and commuting.) If you’re young and single, maybe you want to focus on your career and climb the corporate ladder. If you’re a father of two small kids, making it home for dinner every night might be your top priority. Then look at the perks and decide if they’re worthwhile to you. For example, a free pass for doctor appointments didn’t matter to me in the least, but I would’ve jumped at the chance for a flexible schedule.

In short, don’t assume that salary pay is necessarily better. Every job and every employee’s personal situation is different, so crunch the numbers and weigh the benefits for yourself.