Before hiring the right person for the job, you need to decide how you'll pay them. Two of the most common ways to pay employees is with a salary or an hourly wage.
You're probably wondering which option is better: the flexibility of an hourly employee or the stability of a salaried one. Of course, the answer is never as straightforward as we'd like.
Let's compare the pros and cons of hourly vs. salary workers, the different laws for each, and what to look for when determining the right fit for your business.
What is a salaried employee?
A salaried employee earns an annual wage regardless of when they clock in and out. In other words, whether you work 20 hours or 60 hours per week, the number on your paycheck stays the same.
To state the obvious, an employee isn't paid their entire salary on the first day. Instead, it's divided by the number of pay periods, often on a weekly, biweekly, or monthly basis. For example, an employee with a salary of $60,000 a year, paid twice a month, would receive $2,500 per paycheck.
Pros of Salaried Employees
Even if an employee clocks additional hours during the week, they receive the same rate per paycheck. Meaning, you don't need to compensate employees who go beyond the standard 40-hour workweek.
Another advantage of salaried employees is the predictability of payroll. Every salaried employee signs an employment contract outlining their base salary and frequency of payment. When it comes time for payroll, you know exactly how much to...
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