Pros and Cons of Salary vs. Hourly Pay: Which Is Better?

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Employers pay staffers in two basic ways. Some offer hourly pay while others provide an annual salary. Depending on your needs, goals, and financial situation, one may be more appealing than the other. Explore the pros and cons of salary vs. hourly pay so that you can navigate and negotiate your job offers – and get compensation in a way that best suits you.

The Benefits of Salaried Pay

If you are hired as a salaried employee, you will receive a set annual figure, like $35,000 or $73,000, in exchange for performing your job duties on a set schedule. Whether you work 38 hours or 46 hours each week, your salary remains the same.

There are many benefits to accepting a salaried position:

  • You can budget with the predictability of receiving the same amount every two weeks
  • Your paycheck does not decrease if your company is closed for a holiday
  • You are more likely to receive health care, retirement, sick days, and vacation benefits

The Cons of Salaried Pay

Every benefit has a downside lurking behind it, unfortunately. A set annual income can also be restrictive. It eliminates the ability to earn more or increase your financial standing unless you get a second job. Worse yet, your pay is the same regardless of how much you work, so on especially busy weeks you might put in additional hours, working into the night and weekend without any extra compensation.

The Benefits of Hourly Pay

Hourly pay works differently than a salary arrangement. As an hourly employee, you are paid for the time you work: Nothing more and nothing less. If you work 34 hours a week, you get paid your hourly rate for 34 hours.

There are a few benefits to this system that might appeal:

  • If your employer needs you to fill in for another person or take an extra shift, you will get compensated for your time. You can volunteer for additional work too.
  • If you are required to work overtime, you get paid time-and-a-half your normal hourly rate. Some employers even pay double for holiday shifts.
  • You can expect a strong work/life balance since you aren’t paid to “take your work home with you.”

The Cons of Hourly Pay

On the other hand, hourly pay has its limits. Most notably, your income isn’t guaranteed and you can’t always predict your paycheck from Friday to Friday. If your company is forced to close for a snowstorm or cut hours seasonally, you’ll feel the direct hit in your pocket.

Salaried workers aren’t compensated extra for longer hours, but they don’t dinged for shorter ones, either if they get in late or leave early occasionally. In contrast, when you’re “on the clock,” If you’re not actually working, you’re not getting paid.

Additionally, hourly employees usually don’t receive health care coverage unless they work more than 30 hours a week with a company that employs at least 50 people. If your hourly rate isn’t high enough to cover your extra healthcare costs, this puts you at a major disadvantage.

Overall, you can’t judge a job by its compensatory cover and assume it is better or worse due to its salary or hourly arrangement. Every job and employer is different, so read the terms of employment carefully and don’t be afraid to respectfully negotiate. With the right approach, you can find a job that gives you a healthy balance between both financial worlds.

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