There are different types of agreed types of payment by the employer and the employee, such as breaking the monthly salary into two parts (payment in 15 days), daily wages, or hourly pay. Salaries are usually for full-time and permanent work, usually with a fixed pattern.  

On the other hand, hourly pay is for flexible hours like week-to-week contract-based work and is more common in retail, hospitality, and contract-based work where your hours are flexible week to week. 

However, the differences between them aren’t just when you receive that notification from the bank. It is also linked to benefits and contractual arrangements. Usually, these details are covered in an employment contract. 

Why is it important for employers to know the difference? 

Understanding the difference between both salary and hourly pay can not only help your business but also let you make betterment for your employees. 

What’s the salary? 

Salary refers to the fixed compensation that is paid regularly at the end of the agreed time period for the services provided by them. It is having a more consistent approach, mostly full-time jobs, and not much change in job roles or positions.  

However, if there is a promotion, a newly agreed amount of salary is decided. 

Why are monthly salaries preferred?  

The best-known and the main benefit of salary is the consistency that comes with it. A salaried person knows that his agreed salary will be in their hands at the end of the month, so they plan their weeks accordingly.  

Another benefit is that a salaried employee is more likely to receive paid leave, health care, pensions, and other employee’s benefit. 

Why would an employee not choose monthly-based salaries? 

According to federal law, hourly employees should work for 40 hours a week and additional payment should be made if they worked extra. This benefit doesn’t come if the employee is salaried. Employees give long hours to get the job done, especially projects with tight deadlines.  

What’s hourly pay? 

An hourly payment scheme is known as an amount of pay agreed upon and set between the employer and the employee to be paid at the end of the day. This entirely depends on the number of hours the employee was working. 

Advantages of hourly pay 

The main advantage of an employee of hourly pay is the overtime and the holiday pay.  

Since a salaried employee doesn’t receive extra pay for the extra working hours, an employee working for hourly payment will receive the same payment as agreed for the number of hours he put in getting the job done. 

Moreover, an hourly waged employee will have their payment at the end of the day. As an employer, you won’t have to be fussed about taking a huge amount from your profit account at once for salaries.  

Disadvantages of hourly pay 

Hourly pay is the pay cut you will have to take if there is no work at that time or day.  

Struggling businesses that pay their employees on an hourly basis may cut hours from employees in order to save finances.   

Another disadvantage is the lack of benefits as compared to a salaried employee and the time punctuality and non-flexible schedule with a pay cut if the employee is late for their shift. 

So, which one do you think is better for you or your employees?