Salary vs. Hourly Employees – How should you pay your hired help?

The decision on how to pay your employees can be hard. You not only have to decide how much you will pay them but you must decide whether you will pay them on an hourly or salaried basis. Laws and benefits exist for both ends of the spectrum that you should take into consideration when deciding.

Pros and Cons of Paying Salary Wages

A benefit of paying employees a salaried wage is that their wages are predictable. Their wages are usually the same amount every pay period, making personal budgeting easier for you.

Also, many individuals feel that a salary comes with a more valued position. Although it may not mean your secretary has a greater job status than an executive, it may make them feel like they have more worth (and studies have proven that people work harder when they feel valued).

On the negative side, if an exempt salaried employee exceeds 40 hours in a workweek, you will not have to pay them overtime wages which is not great for your employees. If you plan to have employees work more than 40 hours on a regular basis, you either should increase their salary wages or start them out from the beginning on an hourly basis.

Hourly wages are often associated with irregular schedules. If you plan to have individuals work varying shifts, hourly wages are sometimes the way to go, although they can lead to unhappy employees at times as well.

Pros and Cons of Paying Hourly Wages

Paying employees on an hourly basis can simplify the process of cutting down on payroll costs, should the need arise.

On the other hand, if you want an hourly employee to work more, you must pay for every hour they work, possibly leading to overtime pay. This will increase your payroll costs if you require your hourly employees to work extra.

Neither paying salaried or hourly wages is the right answer for everyone. Take into consideration what your business’s industry and employee tasks are along with your financial needs.