Questions about employee pay loom large at many companies despite the economic environment in which a business finds itself operating. Debates rage over what to pay some employees and whether a certain chief executive is worth her multi-million-dollar salary.
Not far behind those discussions are the arguments about the effects of being an hourly employee, rather than a salaried employee. And that deliberation is followed close behind by the talk of the advantages and disadvantages of being a salaried employee.
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What Is a Salaried Employee?
A salaried employee is paid a fixed or set amount of money each year. A salaried, or exempt, employee might be paid on a weekly, bi-weekly or monthly basis. So, a person who earns a salary of $75,000 per year and is paid on a weekly basis will receive $1,442.32 per week. In most cases, if you are compensated on a salary basis, your gross pay will be the same each pay period, despite the number of hours you work during that period.
Employees who are paid a salary are often referred to as exempt employees, or employees who don't qualify for overtime or minimum wage, according to the Fair Labor Standards Act (FLSA). Consequently, in general, exempt employees don't track their hours using a daily timesheet or another similar device. There are, however, situations in which salaried employees do qualify for overtime and minimum wage. The FLSA describes these situations in full.
As a salaried employee, it's likely you may also receive paid time off for a vacation, the holidays, personal and family and medical leave.
Advantages of Being a Salaried Employee
For as long as you remain a salaried worker and employed by the same company, you will receive a paycheck. What's more, except for certain circumstances, such as a promotion or demotion, the amount of your paycheck will be the same.
Income level is an element of a competitive pay policy a company may use to attract exempt employees. So, as an exempt employee, it's likely that you'll be paid more than if you were a nonexempt employee. The higher salary is due in part to the expectation that you'll work to complete tasks regardless of the hours required to do so.
As a salaried worker, it's likely that you'll not only pull in higher income than if an hourly worker, but also more benefits. In fact, benefits, such as a hiring bonus, are typically an element of a package that a newly hired salaried worker hammers out with the hiring manager. What's more, you might be granted bonuses and a greater number of paid vacation days than that available to an hourly employee.
Disadvantages of Being Salaried Employee
Hours Worked Per Week
As an exempt employee, you're expected to work the number of hours needed to complete your assigned tasks. The completion of these tasks may require a 40-hour week or an 80-hour week and that schedule may be a temporary one or an expected standard.
With few FSLA-defined exceptions, as a salaried employee, you will not receive time-and-a-half pay for the hours you work greater than 40. Some exceptions relate to positions where people earn a salary less than a state- or federally-defined baseline.
For instance, under Texas laws that govern overtime, all employees must receive overtime pay unless they are paid a salary of at least $455 per workweek and perform duties satisfying one of the recognized overtime exemptions, including executive, administrative, professional, outside sales or computer-related positions.
According to the FLSA, as of January 1, 2020, employees must earn $684 per week or $35,568 per year or more, and perform certain duties to be exempt from overtime pay.
Other FSLA Protections
When you hold a job that's as an exempt position, you aren't covered by FLSA rules and regulations that relate to minimum wage and overtime hours, nor are you granted other rights and protections, such as overtime restrictions.
When considering a career, you must ask and answer many questions. An important one relates to whether you prefer a salaried or hourly position. The answer to that question will depend in part on whether you prefer an exempt job that pays a consistent, relatively high salary or a nonexempt one that's more closely governed by the U.S. Department of Labor.