There are several ways a company may pay its employees, with hourly and annual salaries being two of the most common. The most significant difference between these two payment options is how the company calculates their pay, along with the benefits of each option. Understanding the difference between hourly and salaried pay can provide you with information to make an informed decision when accepting a job offer. In this article, we discuss hourly vs. salary pay, the factors that affect these payment schemes and explore the benefits and drawbacks of each.
What is hourly pay?
Hourly pay or hourly rate is the compensation you receive based on each hour or portion of each hour you work in your position. As an hourly employee, your company pays you for all working time. If your employer wants you to work longer hours, they must compensate you for your time.
Benefits of hourly pay:
– You get paid overtime
– You get paid for statutory holidays
– You have more flexibility
What is salary pay?
A salaried position, or salary pay, is the compensation you receive based on a fixed amount consistent throughout the year based on a set amount of hours. As a salaried employee, the company pays you based on an annual amount. For example, your yearly salary based on an agreed 40 hours per week is $75,000. Typically, the company distributes your salary into equal or near-equal amounts for every pay period. Companies may pay out monthly or bi-monthly; however, some may choose to pay out annually.
Benefits of salary pay:
– You get paid time off and holidays
– You receive more benefits
Companies consider these factors when determining an hourly rate or salary for a position:
- Position level within the organization
- Location and economic status for the cost of living
- The comparison to the industry average with similar positions
- Expectations and responsibilities of the role
- Experience level and educational background
Source: Indeed.ca