Have you ever wondered how salary works? There are all kinds of jobs in the world\u2014and different ways to pay the people who do them. For example, some might do freelance work in today\u2019s gig economy, some might make an hourly wage and some may earn a fixed salary. A salary is one of the most common forms of pay.<\/p>
When someone receives a salary, this means that they aren\u2019t paid an hourly rate. Instead, they are paid a set annual rate that the company breaks up into paychecks, typically every other week or month. Along with the money they receive in their paycheck, they often also get benefits. <\/p>
Typically, salaried employees don\u2019t keep a timesheet since they receive a fixed amount of money despite how many hours they may work.<\/p>
A salary refers to a fixed amount of money or compensation that employees receive every year from their employer in return for their work. Though you often earn this regular payment on a monthly or biweekly basis, you often express your salary as an annual sum. The amount of salary you earn depends on things like your employer, your level of experience, industry standards and your geographic location.<\/p>
While salary and annual income may sound like the same thing, they\u2019re often different. That\u2019s because a person\u2019s annual income includes all the sources of income they earn in a year.\u00a0This can include things like the salary, tips and bonuses someone earns at their job. It can also include earnings from things like:<\/p>
Along with bi-weekly or monthly paychecks that average out to the same amount each time, a salaried employee typically receives benefits and other job perks. A salary may include the following benefits:<\/p>
Workers typically fall into two categories\u2014exempt and nonexempt. Exempt employees generally earn a preset salary, while nonexempt employees most often earn an hourly wage. However, there are exceptions where salaried employees might still be considered non-exempt.<\/p>
Here are some specifics around salary and hourly compensation:<\/p>
Even salaried workers may sometimes want to know how their paycheck translates into an hourly rate \u2014 for instance, when they\u2019re exploring jobs that pay by the hour.\u00a0<\/p>
To\u00a0calculate your salary as an hourly rate, you generally divide the amount you make per paycheck by the number of hours you worked in that pay period.<\/p>
Earning a salary includes the following advantages:<\/p>
If you stick to a strict budget, then getting paid a salary is ideal for you. That\u2019s because you can expect the same amount of money each paycheck and plan accordingly. Even if work is slow, you\u2019ll still receive that same amount of cash whereas, with an hourly job, your hours and payment would simply be cut. Likewise, employers have a payment calendar, so you\u2019ll know exactly when your next paycheck is coming. <\/p>
Oftentimes, employees set up direct deposit so the money goes straight to their bank account.<\/p>
A major perk of a salaried job is that you are likely to get benefits from your employer. Since insurance expenses can quickly add up when you\u2019re paying for them on your own, such benefits can actually save you a lot of money. Likewise, getting paid time off is a major benefit so you can still get paid if you were to take a sick day or go on vacation. <\/p>
An hourly employee could take time off, but they wouldn\u2019t be compensated for it.<\/p>
Working a salaried job can be worth it for the career opportunities you\u2019re exposed to. Oftentimes, salary jobs come with a lot of responsibilities, meaning that you\u2019ll get to develop many different skills. It\u2019s also likely that you have a higher chance of being promoted within a company that has salaried positions. <\/p>
That\u2019s because management and other leadership roles may need someone with full-time experience.<\/p>
Of course, there are some downsides to earning a salary, including:<\/p>
It\u2019s quite rare for an employer to pay salaried employees overtime. As an hourly worker, you can get paid overtime if you work more than 40 hours in a week. Many businesses pay time and a half for overtime pay, making it more of an incentive to take on additional hours. If you were to work more than 40 hours in a salaried position, you\u2019re technically getting paid less if you were to divide your paychecks by the hours you\u2019ve worked.<\/p>
Although many salaried employees benefit from paid holidays, they usually do not have the opportunity to be paid extra for working holidays. Many hourly employees have the opportunity to make time and a half on holidays, with some employers paying double or triple time for bigger holidays.<\/p>
Since you don\u2019t technically clock in and out of a salaried job, you may find it more challenging to separate your\u00a0work life and home life. Salaried employees tend to be more susceptible to taking work home, answering messages outside of business hours, or staying at the office late.<\/p>
Hourly pay is the rate paid per hour of work. Employees who are paid by the hour are eligible for overtime pay equal to their base wage plus 50%. A salary is a specific amount of compensation regardless of the number of hours worked. Employees who are paid a salary are not eligible for overtime pay.<\/p>
You’re paid for all the hours you work if you’re an hourly employee. Your employer must pay you more if they want more of your time. Legal overtime is time and a half and some employers may pay double time for holidays. This isn\u2019t mandatory, however, unless it\u2019s part of a contract that covers your job. You could bring home more than if you earned the same official pay on a salaried basis if you\u2019re in a well-compensated field with lots of available overtime.<\/p>
There\u2019s also an effect on lifestyle. Hourly employees can find it easier to separate home and work. They can concentrate on family, hobbies, or a second job when their work is over for the day.<\/p>
Unfortunately, being paid hourly also makes you more vulnerable. Hourly employees often feel the impact first when laws change or their company goes through tough times. It\u2019s easier for an employer to knock off some of your hours until business improves than it is to eliminate an entire salaried position. Hourly employees protected by a union may be protected against some of these risks, however.<\/p>
There also are possible effects on eligibility for healthcare coverage. Businesses with 50 or more employees are required to provide healthcare to full-time employees, who are defined as people working 30 or more hours. Some businesses keep hourly employees to fewer than 30 hours to avoid this mandate.<\/p>