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.
Consider also: How to Calculate Salary Per Month
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Possibly No Overtime Pay
When comparing salary versus hourly wage advantages and disadvantages, consider that getting paid an annual salary often means no paid overtime. In other words, you get paid the same amount, whether you work 40 or 80 hours in a week. The exception is if you're classified as a non-exempt salaried worker where overtime would apply in your case.
In contrast, 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.
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. Also, note that the U.S. Department of Labor doesn't mandate holiday pay for any worker for a private employer.
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.
Consider also: My Annual Salary Doesn't Match My W-2
Workload Disadvantages of Salaried Employment
Another one of the disadvantages of salaried employment is that 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.
Pay Cuts During Hard Times
Salary versus hourly wage employment advantages and disadvantages can also be seen during tough economic times or during periods of decreased revenue for a company. This is when employers could make potential cuts 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.
Consider also: The Advantages & Disadvantages of Being a Salaried Employee