Misclassified as Exempt? Should You Get Overtime? A Lawyer Explains Hourly vs. Salary
How does hourly pay work?
Hourly workers are compensated for the actual hours they put in. The pay an hourly employee receives is determined by their work schedule, as opposed to salaried employees who are paid a set salary. Consequently, as an hourly worker, your pay fluctuates every week.
You receive at least the minimum wage as an hourly worker. Employers must pay the higher of the state or federal minimum wage, which varies by state, whichever is higher. Consult your state’s Department of Labor website for details on minimum wage.
What is an hourly employee?
An employee who is paid by the number of hours they work each week is referred to as an hourly employee. While hourly workers are compensated for the total number of hours they work, salaried workers are paid a set wage regardless of how many hours they work in a given week.
Additionally, hourly workers are not bound by a contract with their employers, and they are required to keep track of their working hours using a timekeeping system or timesheet. Your employer chooses the number of hours you work each week as an hourly worker.
What are exempt employees?
Exempt employees are those who are not eligible for minimum wage or overtime pay. Rather than getting paid hourly, exempt employees get by salary. As of Jan. Employees are considered exempt as of January 1, 2020 if they receive a weekly salary of at least $684.
Typically, exempt employees have professional or executive-level positions. Four job categories are listed as exempt from the Fair Labor Standards Act: professional, administrative, outside sales, executive, and computer-related.
Most exempt workers do not receive additional compensation for overtime hours worked, but some employers may elect to do so by giving them flat sums, bonuses, extra pay, or unpaid time off. Employers must follow applicable laws if they provide voluntary pay.
What are non-exempt employees?
Employees who are eligible for the federal minimum wage and overtime pay are referred to as non-exempt employees. Typically, non-exempt workers make less than $684 per week or $35,568 annually.
Most non-exempt employees have blue-collar jobs. Therefore, you can find the majority employed in physical labor-intensive fields like construction, maintenance, or other jobs. Higher-ups manage their workflow and oversee their work.
Can hourly employees earn overtime?
Hourly workers are required by law to receive overtime pay once they exceed 40 hours per workweek. Remember that the majority of hourly workers fall into the non-exempt category.
Exempt workers are not entitled to overtime pay, but non-exempt workers who work more than 40 hours per week must be paid both the minimum wage and overtime. For each hour of overtime worked, non-exempt employees are entitled to time and a half of their hourly pay.
What are the pros and cons of being an hourly employee?
Due to overtime pay, hourly workers frequently make more money than salaried workers. Additionally, you are aware that you are paid for each hour you work rather than receiving a fixed salary regardless of how many hours you put in.
Despite these benefits, there are some drawbacks to hourly pay. Overtime aside, hourly employees typically earn less than salaried employees. If you take advantage of overtime, your pay will fluctuate each week. Although you usually know what to expect when you get your paycheck, your pay varies more than that of a salaried worker. Essentially, youre not guaranteed a set salary per month.
Additionally, employers frequently provide hourly workers with a limited benefits package. As a result, you might receive a healthcare plan that is of lower quality or have fewer vacation days than salaried workers.
How to calculate hourly pay
Making more educated decisions about your time and money can be achieved by learning how to calculate hourly pay. If you are salaried, use the steps below to determine your hourly wage:
1. Determine your yearly income
Check your most recent pay stub if you are unsure of your yearly salary. Make sure to multiply your gross pay by the quantity of pay periods in a given year.
2. Know the hours you worked in a year
Calculate how many hours you worked during a given year.
As an illustration, if you worked eight hours per day, five days per week, for 52 weeks in a year, you would compute as follows:
8 x 5 x 52 = 2,080
Therefore, you worked 2,080 during this year.
3. Calculate your hourly wage
Subtract the number of hours you worked in a year from your yearly income. This calculation results in your approximate hourly wage.
Consider this scenario: Let’s say you earn $30,000 per year and put in 2,080 hours of work. Using these figures, perform the following calculation:
30,000 / 2,080 = $14.42 per hour
FAQ
What does being an hourly employee mean?
A person who works an hourly schedule is paid for those hours. Employees receive a set hourly wage and are typically entitled to overtime pay when necessary. When an hourly employee works more than 40 hours per week, they typically receive time-and-a-half compensation.
What’s the difference between salaried and hourly employees?
Salaried workers make the same amount of money every month, but they may need to put in more time when the demands of their position call for it. Hourly workers are compensated for the number of hours they put in, but they are also entitled to overtime and bonus pay for any time spent working past the standard 40-hour workweek.
Is it better to be salary or hourly?
Salaried workers benefit from the stability of regular paychecks, and they typically earn more money overall than hourly workers. Additionally, they frequently have easier access to benefit plans, bonuses, and paid time off.
What does it mean to pay hourly?
Conclusion: An hourly worker receives a set wage for each hour of work. In order to pay those workers each pay period, as the employer, you must keep track of the number of hours they put in. Hourly workers are also entitled to overtime pay, usually time and a half, for every hour they put in more than forty.
