Employees who receive annual salaries each year instead of hourly pay enjoy a number of advantages, but experience disadvantages as well. The primary advantage to an annual salary is consistency; your paycheck is typically the same each time, unless you are paid partly by a combination of base salary and commission. However, earning an annual salary has its downsides as well.
One of the primary disadvantages of getting paid an annual salary as opposed to getting paid by the hour is that you do not get paid overtime. In other words, you get paid the same amount, whether you work 40 or 80 hours in a week. Hourly employees are paid a higher hourly wage once the employee works a certain amount of hours in a week, typically 40. Overtime pay is usually 50 percent higher or more. Salaried employees might frequently work more than 40 hours a week, but the paycheck remains the same.
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No Holiday Pay
Similar to overtime pay, hourly employees are often paid a higher wage to work on holidays. However, salaried employees do not enjoy this benefit. Working on holidays without a higher compensation rate is another disadvantage of getting paid an annual salary. The nature of your business might require you to work on a holiday. Retail businesses or other businesses that cater to consumers are often open on holidays, and you might find yourself working instead of enjoying the day off.
Salaried employees often carry more expectations or responsibilities from bosses. Thus, you might do more work and work longer hours than your hourly co-workers. While this does provide more job security, it also increases your workload, which can lead to less free time and more work-related stress. Employers might knowingly assign tasks to you over hourly employees because they know that giving you more work does not change how much you are paid; it might cost the company more to give the work to an hourly employee.
During tough economic times, or during periods of decreased revenue for a company, the company might look to cut a number of expenses to save money. Employee salaries are often one of the expenses to get cut. Hourly employees typically get their hours cut, but the rate often remains the same, so the pay still reflects the amount of time worked. Salaried employees, however, might take a pay cut, or a reduction in salary, but are still often expected to work the same amount of hours. While a pay cut is often better than getting laid off, it is still a disadvantage to receive a pay cut because your workload does not change, but you get paid less than before the pay cut.