Whether you’re a job seeker or current employee, understanding the difference between salary and hourly pay is essential. Your pay structure can significantly impact your income, work-life balance and long-term career decisions. As you begin any job search — or weigh compensation and benefits packages from different employers — it’s important to consider the benefits and drawbacks of salary versus hourly pay.
Questions to explore before meeting with hiring teams include: How does salary pay work compared to hourly pay? Do salaried employees get overtime? What about hourly employees? Is salary better than hourly pay? Read on to gain clarity about salary and hourly pay, which can help guide you in your career decision-making.
[See: 25 Best Jobs That Pay $100K.]
What Is Salary vs. Hourly Pay?
Salary and hourly pay are forms of employee compensation. Some positions are more likely to offer a salary over hourly pay, and employers should include this information in any employment contract.
Salary is generally paid to full-time employees as a consistent, fixed-amount payment distributed bimonthly or monthly. While some companies rely on set salary bands or ranges for each job, others have more flexibility in determining salaries and may negotiate with candidates to agree on a final salary during the hiring process.
An applicant’s education level and work history are factors that often determine the salary a company offers a candidate. An employee’s level in the industry, a job’s classification, and an employee’s or job’s location can also affect an employer’s salary offer.
Hourly pay is sometimes referred to as an hourly rate. If an employer provides compensation in the form of hourly pay or rate, an employee is paid a set amount for each hour worked. If you’re going to be paid on an hourly basis, it’s crucial to know the rate you’ll receive for each hour you spend working.
Depending on the job, your hourly rate may be based on the minimum wage in your state or on the federal minimum wage. For example, in Texas, the minimum wage is $7.25 an hour, the same as the federal minimum wage. Your employer may offer a higher hourly rate, and you may be able to negotiate.
To determine how much you’ll be paid when working for hourly pay, multiply the number of hours you work by your hourly rate. For example, if you work 10 hours at a rate of $20 an hour, you’ll receive $200 for your work. The more hours you work, the more you’ll get paid. Salary pay, on the other hand, is generally fixed at a set amount regardless of the number of hours worked.
[SEE: 25 Best Jobs That Pay $80K or More]
Pros and Cons of Salary vs. Hourly Pay
If given the choice between salary and hourly pay, what should employees consider? There’s no right or wrong answer, and you should base your decision on personal factors related to the benefits and drawbacks of each type of payment structure.
Benefits of Salary Pay
The key benefits of jobs that offer a salary include the consistency of a regular paycheck, the ability to qualify for additional employer benefits and the likely greater potential for advancement opportunities. If you prefer the security of steady payments, tapping benefits that may add to your net worth such as health insurance and paid time off, and positioning yourself for management roles, salary pay may be your best bet.
Criminal defense attorney Benson Varghese, founder and managing partner of a 50-person law firm in Texas, said the predictability of a salary is one reason it’s the most attractive option for professionals. “It gives people a financial baseline they can build a life around — mortgages, kids, retirement,” he said in an email. “Hourly wages can fluctuate, and while the possibility of overtime sounds great, it’s not always consistent or guaranteed. With salary, the value isn’t just in the paycheck — it’s in the stability, the benefits often tied to full-time salaried roles, and the room it creates for upward mobility and leadership.”
Drawbacks of Salary Pay
The key disadvantage of salary pay over hourly pay is that employees may not get paid for all of their hours worked. A full-time employee who spends more than 40 hours a week on the job and receives a salary will generally only be paid for those first 40 hours.
As a business owner in the home services industry, CEO John Wilson, based in Akron, Ohio, frequently deals with decisions around salary versus hourly pay. Wilson noted in an email that the issue of longer hours can be a clear drawback with salaried pay.
“Salaried employees may work more hours without extra pay, which can impact work-life balance and create pressure to meet performance expectations,” Wilson said.
Just because a position is salaried also doesn’t necessarily mean it’s more secure — it can simply mean an employee must work longer hours with no extra pay. Any hours worked over 40 hours won’t be compensated, since employers can demand that employees take the amount of time necessary to complete all of their job responsibilities.
So if you have a demanding job that requires more than 40 hours a week to finish your tasks and assignments, you could end up working for free for those additional hours.
“Salaried roles offer a steady paycheck, and in higher-level jobs, they come with more benefits and autonomy,” William K. Holland, a personal injury attorney based in St. Louis, Missouri, said in an email. “But they often blur the line between work and life. I’ve seen people burn out. When salaried employees don’t track hours, they often work more than they’re paid for.”
Benefits of Hourly Pay
You can potentially make more money with hourly pay — particularly if you work more than 40 hours a week — since employees paid this way are eligible for overtime compensation. Employers are mandated by federal law to pay hourly workers overtime for any additional hours they work over 40 hours a week, while salaried employees are generally considered exempt from overtime and won’t receive pay for these extra hours.
Wilson pointed out that hourly pay compensates employees for every hour worked, allowing them to earn more for extra hours. “Hourly jobs often offer flexible scheduling, which can be beneficial,” he said.
Another benefit of an hourly pay structure is that these employees may be able to receive holiday pay at higher rates for working on major holidays like Christmas or New Year’s Day. A common holiday rate hike for hourly workers is time and a half, which means workers receive payment at 1.5 times their standard hourly wage. Finally, hourly pay may allow for greater schedule flexibility, giving employees more ability to choose the hours they work, or they may be able to work fewer than 40 hours a week.
[READ: Best Jobs for Work-Life Balance]
Drawbacks of Hourly Pay
Hourly employees may be ineligible to receive additional employment benefits that are available to full-time salaried employees, including matching 401(k) contributions, maternity or paternity leave, and paid sick and vacation time. Also, workers who receive hourly pay may be more vulnerable than salaried workers to cutbacks in hours, pay rate reductions or being let go by their employer.
Another disadvantage is that if you miss or skip work time due to lateness or taking time off, you’ll miss out on getting paid as an hourly worker, while salaried workers have built-in mechanisms to still be compensated despite such absences or tardiness. “The downside of hourly pay is that hours can be inconsistent,” Holland said. “You might be sent home early if business is slow. I’ve had clients in hospitality lose income that way.”
Choosing Salary vs. Hourly Pay
What should you do if you’re offered the choice between receiving a salary or hourly pay?
Wilson suggested that employees should evaluate their financial needs and preferences. “If stability and benefits are priorities, salary may be better,” he explained. “If flexibility and earning potential through extra hours are more important, hourly pay could be the right choice.”
It’s also important to consider whether receiving overtime pay is important to you, since salaried employees may not qualify for overtime pay, depending on their job responsibilities. “Exempt employees typically do not receive overtime and hold higher-level positions, while nonexempt employees are entitled to overtime pay after 40 hours in a week,” Wilson said.
“If someone’s choosing between the two, they need to ask: How many hours am I really working, and how much control do I have?” Holland concluded. “Are the benefits worth the lack of overtime? It’s about more than the base pay.”
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Salary vs. Hourly Pay: What’s the Difference? originally appeared on usnews.com
