Regardless of your profession, it’s important you’re fairly compensated for the work you do. Although your compensation will always include pay, in many scenarios you’ll also be offered a suite of benefits to choose from.
As an employee, you need to understand what you garner for your efforts — including benefits. This helps you budget, plan for the future and, perhaps most pressingly right now, compare job offers.
That said, how you’ll be paid and not just how much is also important to consider.
Though it doesn’t make a major impact in most scenarios, there’s a difference between earning a salary and being paid by the hour. For example, under the Fair Labor Standards Act (FLSA) hourly employees (who are typically non-exempt) must be paid overtime where applicable.
To ensure your job aligns with your expectations and goals, these are the kind of ripples you want to consider during your job search.
Here at Anderson Trucking Service (ATS), we’ve been employing transportation professionals — in a variety of locations — since 1955. Over the years, we’ve employed hundreds of people. Depending on their position (and a number of other factors), some of our employees are paid hourly while others earn a salary.
In this article, you’ll learn the key differences between hourly and salary compensation as well as the role the FLSA plays in this process.
What is the Fair Labor Standards Act (FLSA)?
Initially established in 1938, the Fair Labor Standards Act is a labor law governing U.S. employers. Among other things, the FLSA sets rules companies must follow regarding compensation minimums for exempt and non-exempt employees, record keeping, overtime pay and youth employment.
Although the fair labor standards act was originally published in 1938, it has been updated many times with adjustments made periodically to reflect the current U.S. employment environment.
For the purpose of this article, one of the FLSA’s most important functions to call out is its criteria for categorizing a role as exempt or non-exempt from overtime pay provisions and/or minimum wage.
Typically, employees must meet two criteria to be classified as exempt:
1) They must be paid a salary of no less than the FLSA-established weekly minimum.
2) Their duties must align with those listed under any of the FSLA’s exemption categories.
Currently, the six exemption categories are:
- Executive Exemption
- Administrative Exemption
- Professional Exemption
- Computer Employee Exemption
- Outside Sales Exemption
- Highly Compensated Employee Exemption
If an employee’s primary duties and responsibilities match those outlined in any of the categories above, they qualify as exempt in most instances.
Note: requirements for holiday pay, paid time off benefits and bereavement allotments aren’t regulated by the FLSA.
What is a Salary Pay Structure?
A salary is a payment structure where an employee is compensated a fixed amount over a set period of time. Usually, salaries are stated as the total amount an employee will earn annually. Salaries are paid progressively over the course of a year on a regular basis — typically every two weeks, bi-monthly or once per month.
For example, someone earning a salary of $50,000 per year can expect to garner $4,166.67 per month (before taxes and deductions).
Most employees who earn a salary perform duties that qualify them as exempt under the FLSA. Under this pay structure, a salary usually won’t change if an employee works more than 40 hours per week since overtime pay isn’t applicable.
What Kinds of Roles Are Usually Salaried?
As you may suspect, there are a wide array of jobs that qualify as exempt under the FLSA. In turn, many of these positions are salaried.
Though this is not a comprehensive list, a salaried pay structure usually accompanies most positions in the FLSA exemptions categories (e.g. Administrative, Professional, Computer, Sales), including:
- Doctors, Dentists, Registered Nurses, Pharmacists
- Architects, Engineers
- Accountants, Financial Analysts
- Human Resources, Safety, Technology Professionals
- Management Positions
- Outside Sales Positions
Again, a job’s exemption is dictated by the duties it performs. In some cases, there’s a fine line between a role qualifying as exempt and non-exempt. Here is a resource provided by the FLSA with more exemption information.
What is an Hourly Pay Structure?
The hourly pay structure is set up to pay employees for every hour they work at a set rate per hour. As an employee, your hourly wage is what you’ll garner for every hour spent working and you can expect to be paid for all hours worked on a regular schedule. Although the frequency of these payments may mirror the salaried schedule, they could occur more or less frequently.
Under the hourly pay structure, employees aren’t guaranteed to make a certain amount per week, month or year. Instead, their compensation hinges on the time they spend performing work duties.
For example, an employee earning $20 per hour may work 35 hours one week — earning $700 over that span — and 40 hours the next, earning $800.
Most hourly roles aren’t exempt from overtime pay or minimum wage under the FLSA’s provisions. As such, most hourly positions must at least make the federally mandated $7.25 per hour (minimum wage is further regulated at the state level). Hourly, non-exempt roles must also be allotted overtime at a rate of at least 1.5 times their normal wage for work done beyond 40 hours per week, although some employers choose to pay more than that.
What Kinds of Roles Are Usually Hourly?
Generally speaking, hourly (non-exempt) jobs are more common than salaried (exempt) positions. For this reason, there’s a vast array of hourly positions in the U.S.
Some of the common jobs you can expect to earn an hourly wage are:
- Physical/manual labor positions such as:
- Construction workers
- Trade jobs including:
- Mechanics (with some exceptions)
- Clerical/business support positions like:
- Accounting Clerks
- Accounts Payable Specialists
- Some healthcare positions such as:
- Licensed Practical Nurses
- Certified Nursing Assistants
- Some sales positions:
- Retail Sales Associates
- Those who collect orders
- Hospitality workers like:
Salary vs. Hourly Pay: Which is Best?
Whether you’re paid hourly or earn a salary doesn’t really matter as long as you’re compensated appropriately for your work. These are simply the mechanics of how you’re paid based on your position.
That said, if earning a salary is really important to you, it’s possible to pursue a role with duties/responsibilities that qualify it as exempt. Alternatively, if you’d prefer to receive an hourly wage — with the possibility of overtime — you can take steps to find a non-exempt job that pays by the hour.
At the end of the day, it’s likely your job/career choices will be based on other factors (e.g., your interests, skills, work/life expectations) than whether you are paid a salary or on an hourly basis.
Unfortunately, there’s no objective answer to “Which is best, salary or hourly?”
Instead, this is far more subjective. That’s why it’s crucial to select a role based on a number of factors like your skills, interests, personal fit, benefits, culture, total compensation and growth potential — not strictly based on pay structure.
Your Pay Is Important but So Are Other Factors
As an employee, you understand the value of a great employer — a company that cares for its workers by ensuring their success, fulfillment and satisfaction.
Pay is an important part of this, however, you’ll want to consider the other important factors when making career choices that are best for you.
Now you understand the difference between salaried and hourly pay structures and the role the FLSA plays in this process. Being classified as exempt or non-exempt under the FLSA changes what’s required of your employer when it comes to minimum wage and offering you overtime.
In the end, however, it’s up to you to determine whether an hourly wage or a salary is what you’re looking for. This may or may not weigh into your job-selection decision.
During this process, you’ll also want to consider the benefits associated with each job.
That said, benefits packages can be difficult to understand and intimidating at first glance.
To help you decipher each benefits package presented to you, and decide what you’re ideally looking for in one, check out this article. Understanding your benefits package will help you select the best ones for you. So, feel free to reach out with any questions you may have.
Finally, ATS is always looking to add great new talent to our ranks. If you’re interested in working in a booming industry that makes an impact on all others, consider a job in transportation — here are some pros and cons to be aware of. Check out our current open positions here and don’t hesitate to contact us if there’s a position you don’t see posted — we may have the perfect fit for you either way.