When a potential employer offers you a job, he may base your compensation on salary instead of an hourly wage or commission plan. In some cases, you may also move from being an hourly employee to a salaried employee if you change jobs within your company. Salary, which involves a set earnings amount for each weekly, biweekly or monthly pay period, can offer advantages and pose disadvantages.
The ability to predict your income for each pay period is a primary advantage of being a salaried employee. Because fluctuations in work hours will not affect your pay, you will know how much money you have coming in. This can allow you to effectively budget for monthly expenses, such as loan payments, utility bills, entertainment, groceries and child care expenses.
Sense of Trust
When an employer offers a salary-based compensation package, it is extending trust that you will commit your time, energy and talents to the success of the company. You typically will not have a supervisor or manager checking to make sure you showed up for work on time, or to find out if you left work five minutes early. Other employees may also see this extension of trust as a sign of prestige, which can help you feel like a valued member of the organization.
No Paid Overtime
The Federal Labor Standards Act requires employers to pay hourly employees at 150 percent of their regular earnings for each hour over 40 hours worked in a week, and at 200 percent of regular earnings for hours worked on federal holidays. However, salaried employees are typically exempt from this requirement. This means that if you are paid on salary and your job classification is considered exempt, your employer can ask you to work more than 40 hours per week or work on holidays without providing any additional compensation.
In some cases, working as a salaried employee may decrease your motivation to enhance your work performance. Because salary offers little incentive for you if you put in extra hours, work on weekends and holidays and exceed production standards, you may settle into a mindset of doing just enough to keep your job and pay rate. You may also be more inclined to show up late or miss work days, since your pay will not be affected.