Salaried Vs Hourly Employees: Differences You Should Know As An Employer

Employees can be categorized based on the type of work they are involved in and the way they receive their payment. As an employer, if you don’t remunerate them from time to time and the amount they deserve, the relationship you share with them can get complicated. Also, you will be violating federal and state laws. It’s your responsibility as an employer to know the difference between salaried employees and hourly employees, and the ways to offer them remuneration correctly. There are two basic terms – exempt and non-exempt that apply to salaried employees. Read on to know more about how to tell a salaried employee apart.

How to Distinguish Between a Salaried Employee and an Hourly Employee?

A salaried and an hourly employee can be distinguished from each other based on the type of work they are involved in. Aside from that, the status of the employees as being nonexempt and exempt from doing overtime work is also taken into account. As per the federal play, for an hourly employee working over 40 hours a week, an employee should offer overtime pay. The state laws too have a regulation in place as to when overtime payment needs to be done and what the rate of payment is going to be. An employer is often encouraged to be more generous while offering overtime pay to the hourly employees than what the law states.

Who is a Salaried Employee?

A salaried employee receives annual payment which is known as salary. It’s a pre-determined amount that’s offered to an employee on the payday. It has nothing to do with the quantity and quality of work that the employee undertakes.There are a few employees who have employment contracts. According to the United States Department of Labor, someone who is entitled to receive a pre-determined remuneration on every payday, will continue to receive that amount irrespective of any variation in the quality and quantity of their work. Additionally, if an employee is capable and willing to work, unavailability of work can’t lead to a reduction in their payment.

Who is an Hourly Employee?

One who receives an hourly amount is called an hourly employee. In most cases, an hourly employee doesn’t have a contract. They receive payments for the number of hours they work. How many hours should an hourly employee work for is fixed by the employer? It’s the responsibility of the hourly employees to keep documentation of their work either by completing a timesheet or using a time card system. They must ensure that 100% accuracy is maintained in the timekeeping method. There is no such federal law stating the fixed the number of hours an hourly employee must work for in a week. Employees who don’t work full-time can be counted as part-time employees. Part-time employees have pay rates, perks, as well as paid time off, different from the hourly employees who work full-time.

Salaried Employees vs. Exempt Employees

Exempt is usually the status of those employees who receive a salary. However, that might not be the case every time. When an employee is considered exempt, there is no need to give them overtime pay. With that being said, there are certain requirements that an employee has to consider while counting an employee as exempt.

First, all employees must receive the minimum wage as stated by federal law. Two, the federal law states that employees must receive overtime pay at the minimum rate of one and a half times that of their hourly pay for every hour worked in addition to the stipulated 40 hours in a week. The employers are permitted under federal law to count the status of some employees as exempt from overtime remuneration and minimum wage based on their job profile, i.e. administrators, executives, professionals, as well as salespeople who do not belong to the organization. Though a majority of the employees who are considered exempt receive a salary, some may receive the payment on a fee basis.

You must take cautious steps ahead when you are out to start your own business. You must ensure that when you designate an employee as salaried, they fulfill every requirement to be considered exempt from overtime. You may consult a labor law attorney before starting your recruitment drive.

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Employees can be categorized based on the type of work they are involved in and the way they receive their payment. As an employer, if you don’t remunerate them from time to time and the amount they deserve, the relationship you share with them can get complicated. Also, you will be violating federal and state laws. It’s your responsibility as an employer to know the difference between salaried employees and hourly employees, and the ways to offer them remuneration correctly. There are two basic terms – exempt and non-exempt that apply to salaried employees. Read on to know more about how to tell a salaried employee apart.

How to Distinguish Between a Salaried Employee and an Hourly Employee?

Who is a Salaried Employee?

Who is an Hourly Employee?

Salaried Employees vs. Exempt Employees

Exempt is usually the status of those employees who receive a salary. However, that might not be the case every time. When an employee is considered exempt, there is no need to give them overtime pay. With that being said, there are certain requirements that an employee has to consider while counting an employee as exempt.

First, all employees must receive the minimum wage as stated by federal law. Two, the federal law states that employees must receive overtime pay at the minimum rate of one and a half times that of their hourly pay for every hour worked in addition to the stipulated 40 hours in a week. The employers are permitted under federal law to count the status of some employees as exempt from overtime remuneration and minimum wage based on their job profile, i.e. administrators, executives, professionals, as well as salespeople who do not belong to the organization. Though a majority of the employees who are considered exempt receive a salary, some may receive the payment on a fee basis.

You must take cautious steps ahead when you are out to start your own business. You must ensure that when you designate an employee as salaried, they fulfill every requirement to be considered exempt from overtime. You may consult a labor law attorney before starting your recruitment drive.