Lately, there has been a lot of confusion between salary and hourly pay stubs. People are taking hourly pay stubs and appropriating them to salary roles. And it’s not just employees getting confused on the internet. It’s happening on a company level too. Are there remarkable differences between the two pay stubs?
- 1 Payment Rates
- 2 Work Schedules and Overtime
- 3 Benefits
- 4 Skills
- 5 Federal Guidelines for Salaried vs. Hourly Employees
- 6 Should You Track Hours for Salaried Employees?
- 7 Advantages of Salary Pay Stub
- 8 Disadvantages of Salary Pay Stub
- 9 What to Choose
One notable difference between salary and hourly pay stubs is that while salaried employees earn a fixed amount every end of a stipulated period (usually a month), employees paid hourly earn fixed hourly rates on their work.
How Does Salary Pay Work?
Most businesses determine salaries in annual terms and then break it down to fit into their monthly payment schedule.
For instance, if your employee earns a gross salary of $108,000 per annum and you want to fit this into a monthly salary plan, the employee should earn $9000 per month before tax deductions.
A salary pay stub has nothing to do with hours worked; a salaried employee can work 30 hours this week and 50 hours next week but is still entitled to his salary.
Whichever the rate, a salaried employee should earn at least $455 per week. The latter is a Fair Labor Standards Act (FLSA) requirement.
Do salaried employees get paid if they do not work? Yes. They can take sick leave and still draw their normal salary.
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How Does an Hourly Pay Stub Work?
Hourly pay stubs simply pay employees or workers based on the sum of hours worked over a specified period. After negotiating an hourly rate, you multiply that by the total number of hours to determine what the employee should earn, weekly, biweekly or monthly. This is why pay stub generator have come into being, to ease the burden of pay stubs for hourly workers.
However, the hourly rate must be a figure equal to or above the minimum wage rate in your state. For instance, Texas has a minimum wage of $7.25. Many federal and state labor laws have stipulations for how employers should determine salaries or hourly rates.
Work Schedules and Overtime
Full-time employees earn a monthly salary because they have a predetermined work schedule and take on more responsibilities. They can work extra hours without overtime pay and have better career advancement opportunities.
On the other hand, hourly employees are mostly part-timers excluded from predetermined work schedules. They have restricted growth in the organization, and their total earnings vary from month to month.
However, they get to earn overtime pay, usually 1.5 times their hourly rate if they work more than 40 hours a week.
Therefore, one advantage of hourly pay stubs is that employees can make more money if they work for longer hours.
Besides a monthly salary, full-time employees also get retirement plans, job security, health insurance, and paid time off.
A salaried employee who moves up the ladder will likely receive paid sick and vacation days.
But do hourly employees also get benefits? Hourly employees do not enjoy the same benefits as salaried employees. But it doesn’t necessarily mean that they get nothing.
There are several benefits available to hourly employees, such as overtime compensation. They also get medical, and vacation pay benefits when they gain full-time status.
In the eyes of the world, a salaried employee is a bookish professional who wears a clean suit and works on a desk in an office doing a high-level job. An hourly pay stub fellow sweats in a factory or out in the field digging a ditch.
This picture may not be entirely accurate, but the point is that your level of skills can determine whether you become a salaried or an hourly rate worker.
When employers assess the skills of a salary vs. hourly pay stub employee, they ask critical questions, including:
How do an employee’s skills fit into the daily running of the business? Is the employee needed each day or on some days? Can the business function generally without the employee?
The answers to these questions determine if an employee becomes salaried or not.
Federal Guidelines for Salaried vs. Hourly Employees
The Fair Labor Standards Act of 1938 (FLSA), which falls under the US Department of Labor, provides guidelines for salaried or hourly employees’ employment terms.
Since 2009, the Federal minimum wage has stood at $7.25 per hour. However, an employer can legally pay you a subminimum if you are a worker with a disability or are a vocational student.
In that case, you earn piecework rates. A non-profit organization can also pay less than the minimum wage.
Most hourly employees are non-exempt. Employers must pay these workers a minimum wage plus overtime per the Fair Labor Standards Act (FLSA) requirements. But there are also exempt hourly employees; for instance, truck drivers or agricultural workers.
The FLSA guidelines also require that salaried employees performing high-level jobs be exempt. They cannot be eligible for overtime compensation even if they work more than 40 hours per week.
Should You Track Hours for Salaried Employees?
Usually, salaried employees get paid on an hourly basis. Nonetheless, employers need to keep track of the hours for scheduling and appraisal purposes.
When you have visibility into hours worked, you can make adjustments as needed. Time-tracking ensures they are not overworked or underworked. It will also ensure that each employee is accountable for their work and kept productive.
Furthermore, timesheets can help with client billing and FLSA compliance management.
Advantages of Salary Pay Stub
For workers, earning a monthly salary can be advantageous in many ways:
- Starting pay is usually high above hourly rates—you can afford a down payment on a car or house
- It is prestigious to be a salaried employee; you gain authority.
- You earn a consistent paycheck. That’s a stable income.
- Long-term career chances with an opportunity for growth
Disadvantages of Salary Pay Stub
Despite the massive potential for career growth, salaried employees may face several challenges, including:
- Ineligibility for overtime pay
- A salaried employee misses bonuses if he/she fails to meet set targets
- Inflexible work schedules
- If the company wants to cut costs or downsize, salaried employees are usually first to get the ax
Also Read: Top 10 Business Ideas to Earn a Lot of Money
What to Choose
Ultimately, understanding the difference between salary and hourly pay stubs is about context. Hourly pay stubs are for hourly employees, and salary pay stubs are for salaried employees.
That is all. Once that distinction is clear, it’s easy to spot any payroll discrepancies and ensure fair compensation when it comes time to sign the checks.