Personal Finance

Most people enter the workforce as hourly employees. This means you are compensated (paid) for the hours you work. If you work more than you were scheduled in a given pay period, your employer may pay out an overtime rate. Sometimes this is 1.5 to 2 times your regular hourly rate.

A salaried employee is paid a fixed amount each week based upon a year of employment. While the salary rate can be broken down into an hourly rate for administrative reasons, it is often advertised in whole in a job listing.

Pros and Cons

In general, these are the pros and cons of both models of compensation

Hourly Pros

  • Overtime can boost your weekly pay when offered.

  • Weekend or evening hours may come with a differential.

  • Overtime is not always expected because of the additional cost to the employer.

Hourly Cons

  • Taking short amounts of time out of work for appointments means a loss in wages unless paid time off (PTO) is used.

  • An employee generally cannot work beyond scheduled hours to get work done without approval.

  • Hourly employees are generally subject to more micro-management.

Salary Pros

  • You are paid regardless of the hours you worked in a given week. However, you may need to use the earned time to make up the difference.

  • Short amounts of time off for appointments are often not an issue and do not require PTO to be charged.

  • Salaried roles tend to be managerial or senior roles and therefore are generally subject to less micro-management.

Salary Cons

  • If work needs to be done outside of normal working hours, there is no paid overtime option.

  • You are expected to complete the work, regardless of how long it takes. There is not a shift to hand off to.

  • This can lead to burnout due to longer working hours in some companies.

Typically salaried positions have a managerial component or project management component. It is important to consider the whole picture when deciding between a salaried or hourly compensated position. Your lifestyle and family should be major factors in your decision. Salary positions may also offer bonuses.