Many business owners pay little, if any, attention to the kind of employees they hire. Effective workforce management, especially in the challenger stages, calls for knowing the difference between salaried and hourly employees.
Depending on your business, one might suit you better than the other. Not sure how to choose? Keep reading to know the difference between the two and how one scores against the other.
Salaried vs. Hourly Employees: Key Differences
The most obvious thing we may derive from the names is that salaried employees are entitled to a fixed salary, payable every month. Hourly employees are paid based on the number of hours they work each week.
If they exceed the agreed number of work hours per week (usually 40), they may be entitled to overtime pay. Salaried employees are typically not eligible for overtime pay.
Now, the pay model for both salaried and hourly employees may differ among businesses. There are other differences to also consider, including –
- Salaried employees’ personal and professional time often blend, but hourly employees enjoy a better work-life balance.
- Hourly employees are usually not eligible for perks like retirement plans, health insurance, paid time off, or even sick days. Salaried employees enjoy such benefits.
- Salaried positions are undoubtedly secure when compared to hourly work.
Benefits of Having Each
Whether yours is a small or well-established business, there’s much to gain with both salaried and hourly employees. Listed below are the benefits of each to help you make a better assessment.
Perks of Having Salaried Employees
- Increased Flexibility
Salaried employees can work with greater flexibility, the simple reason being that they can easily work around interruptions, even emergencies. Due to this flexibility, their schedule seldom suffers.
- No Overtime Headaches
Paying employees for overtime comes with extra time and costs. Since overtime pay for salaried employees is substituted with benefits packages, the latter is cost-effective and easier to manage. On the other hand, reviewing overtime may become a hassle.
- Easier Payroll
It is easier to calculate monthly payments for salaried employees because they receive a fixed sum each month. Yes, the same may differ based on performance, but it is still easier to calculate. Hourly pay can be challenging since it varies based on the work completed.
Perks of Having Hourly Employees
- The Minimum Wage Benefit
Hiring hourly employees is ideal if your business is in its fledgling stages and you cannot afford large payrolls. You need to pay for the exact number of hours of work done.
- Greater Control over Costs
When entering the lean season, hourly employees offer you greater control over costs. You can schedule less number of hours each week. This is easier than hiring part-time salaried employees.
- Further Savings on Benefits
Unlike salaried employees, hourly employees are generally not eligible for benefit packages. Yes, there is the case for overtime pay, but on the whole, small businesses will still benefit by hiring hourly employees over salaried ones.
Made Your Pick Yet?
The wage growth problem in Australia, which started in 2019, continues to be a matter of concern. While the government implements policies to boost productivity, you can do your part by introducing better workforce management.
Online tools and software are available to make this task easier. Achieve compliance, improve efficiency, and choose the right employees for each role. Your business is unique; carefully compare the two workforce options before you build yours!