The Great Debate: Hourly vs Salary

Here is another one of my newly formed The Great Debate series, make sure to check out the Great Coffee Debate as well. My first real job out of college was working for a bank in their customer service 24 hour banking call center(give me a beer and I can tell you some stories), to be quite honest I was extremely happy to have a job.  When I went into orientation I truthfully didn’t even know how much I was going to make, I did know that it was an hourly position and very similar to a teller or banker.  I have since gone through different positions within the bank and have grown up some and even seen a few different departments within the bank, plus a nice little hiatus down in Florida. Many of the positions offered in our department are hourly positions, they are still a good hourly/salary rate, but it got me thinking what is better hourly or salary?  Here’s a simple breakdown of the pros and cons associated with The Great Debate:  Hourly vs Salary……………………..

Hourly Pros

I have a lot of experience being an hourly worker, I go through some of the pros and cons on a daily and weekly basis.

  • One of the first things I really like about hourly is having set hours.  If I have set hours of 9-5, when the work day is done, it is done, I leave at 5:00 and it’s great my expectations are to drop everything I’m doing and pick up at 9:00 am the next day.
  •  What comes with an Hourly Rate?  Overtime, everyone’s favorite.  If you need or want to stay and work on that extra project, you get paid overtime which is usually 1.5x your hourly rate and in some cases 2x, here comes the $$$.
  •  Having a set schedule is a nice perk to have, nobody expects you to stay till 8pm to get the last report done and for some reason if you do stay late, many times you are a hero.

Hourly Cons

  • Many of the Cons of being an hourly employee actually fit right beside the Pros.  While it is great to be able to leave at 5:00 pm, if you leave at 5:03 pm or come in at 9:03 am, every minute must be documented, taking a 35 minute lunch instead of that exact 30 minute expected lunch, right that down and expect to explain why you did not adhere to your schedule.  Not everyone is as overbearing or follows the HR handbook to the letter, but I’m sure you know someone out there who is.
  • Now this may not be entirely true, I need a little more research on the topic, but my general understanding is hourly employees earn less than salary employees.  The main reason being an hourly employee is expected 40 hours per week with minimal overtime, while the salaried employee is expected to work over 40 hours each week usually 45-50, so this is calculated into the salary figure.
  • One of the Cons that popped in my head is the prestige of having a salary.  I remember during a meeting, many of the more tenured employees were pushing for a salary as this was seen as a higher ranking position and in many cases it is.  Most salaried employees are managers, leaders, and others who face clients and time crunches, while expectations are higher.  Very seldom do you hear about the plumber who makes 150K a year, but rather it’s an hourly wage instead.  The blue collar worker in the factory, the fast food employee, and the cashier at the hardware store are all hourly, these are not considered glamorous or prestigious positions.

Salary Pros

While I don’t have a great deal of experience as a salaried employee, I do interact and work with salaried employees on a daily basis, that and Mrs. Even Steven Money also receives a salary and I talk with her every day.

  • The salary position is often the career position, the mid-level manager, analyst, or CEO.  With this position comes greater responsibility and accountability for managing your activities and employees.
  • In many salaried positions there is a greater flexibility with time off, working from home, and early leave.  During the summers some companies will offer an early leave Friday program to improve employee moral, this is not always available to an hourly employee.
  • Many times with a salaried position the overall bonus structure, vacation, and titles are much better.  Bonus structures are usually geared towards two types of employees: Sales, who are usually some form of salary and commission or commission only and Managers, who are usually salary with an overall bonus program, this is usually tied to influencing and leading the team to better results.

Salary Cons

  • The double edged sword of getting paid more is you actually get paid less, here’s what I mean.  Let’s say the salaried employee is paid 50K using this calculator it amounts to $24.04 working 40 hours.  Except when they start asking to stay a few extra hours like 10 per week and all of a sudden your hourly rate is $19.23 an hour which isn’t so good with all the extra work they have been asking from you.
  • You never really know when you are done for the day?  Since most of the items you work on are less task orientated and more big picture items, you can find yourself staying late because you are not sure exactly what ‘done with work’ actually means.  In some cases a cultural is created to stay late, which makes you look like the bad guy when you are going home at 5:00, when everyone is heading out at 10:00 to show they are part of the team.

Overall I think both an hourly position and salary have equally good benefits.  One thing that always sticks in my mind is when people share with me that they are salary and I tell them that I am hourly, they always seem to want to go back to 40 hour week weeks and the possibility of overtime.  While I cannot control my current position and if I am hourly or salary, I would suggest next time you are offered a position to really look at what they are offering and talk with multiple sources.  It could turn out that like me, when I walk away for a nice long lunch, the financial world will not crumble and leaving at 5:00 feels great because you know what?  The work will always be there tomorrow, until I retire that is!!!!

Whether you are an hourly or salaried employee it’s important to know where you stand financially.  Getting the big picture all in one place with Personal Capital has really helped me see what I can do with my finances today and in the future.  If you don’t know where you are today, how do you know where you are going in the future?  If you’re looking for a great way to track your net worth, analyze your portfolio fees, manage your cash flow, and get a handle on your finances for today and the future, sign up with Personal Capital today.

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27 Responses to “The Great Debate: Hourly vs Salary

  • I’m on salary and I do appreciate the security, benefits and career advancement that comes with it–99% of the time. The 1% I don’t appreciate is unpaid overtime. I had to be at work 2 hours early on Wednesday and I didn’t get to leave early nor will I be paid extra. But, in the scheme of things, I think I have a pretty good situation.
    Mrs. Frugalwoods recently posted…Frugal Hound Sniffs: Planting Our PenniesMy Profile

    • EvenStevenMoney
      3 years ago

      In a corporate setting I think like you said 99% of the time you are happy with the salary and career it offers. I’d be interested to see the difference in your hourly rate over the course of a busy month or week and how much it differs.

  • When I worked for companies as an employee, it was on salary. In my last role with an employer, any approved overtime that I may have worked wasn’t paid in cash but in accrued time off which I preferred anyway.
    Kassandra recently posted…Book Review And Q & A: Train Your Way to Financial FitnessMy Profile

    • EvenStevenMoney
      3 years ago

      I have never heard of that I like it. I could see it having some downfalls if you don’t use it or if it does not carry over, but I’m all for extra time off, especially in the US where many people are only given 2 weeks worth of vacation.

  • I am currently an hourly employee after 18 years as a salaried employee. I am enjoying it. I work 35 to 36 hours each week and get paid for exactly that much work. As a salaried employee I was putting in about 10 hours/day or 50 hours a week. I have ~15 hours back each week.

    I also work from home now. So no commute. Less eating out. I get more done on my lunch half hour.

    I have thought of taking it a step further and being a 1099 contract employee. It would mean a higher hourly rate, but zero benefits of any kind. I opt out of most benefits, except 401k now. But medical, dental are available if I would ever need them.

    Interesting comparison.
    Wade recently posted…Hibernation timeMy Profile

    • EvenStevenMoney
      3 years ago

      That’s great Wade, for you it’s almost like you went from working 2 jobs to 1 with the amount of time you are saving. I mean including travel probably 60 hours a week or more cut down to 35 hours is great. In financial independence I have thought about doing contract work from time to time to stay busy, it’s an interesting option to consider.

  • I am on salary but I can see why some people prefer hourly. With salary you only get paid x amount every 2 weeks regardless of how many hours you work. So you could be working much more than 9-5 but you get paid the same amount which in reality decreases your hourly rate (compared to an hourly worker)

    • EvenStevenMoney
      3 years ago

      That is certainly one of the downfalls of a salaried position. However in most career focused positions, a salary is expected along with those same extra hours and extra pay.

  • I’m a salaried employee. I’ve worked both as hourly and salary, and I do prefer salary. Fortunately, my company and boss respects work life balance. It makes it easier to leave on time. However, when I’m on vacation or take a sick day, I find myself checking email.
    Brandy @bustedbudget recently posted…September Update and October GoalsMy Profile

    • EvenStevenMoney
      3 years ago

      You are right, the work life balance plays into the salary vs hourly in a huge way. If you are leaving at a reasonable time and staying away from those emails at 8pm after dinner then salary is the direction I would prefer as well.

  • I do prefer salary to hourly jobs. I dont think I could manage to account for any minute late or I leave early. However, some hourly jobs come with great rates.
    Amos @ Modest Money recently posted…The Hawaiian Airlines® World Elite MasterCard® ReviewMy Profile

  • I think the additional time that often comes with salaried positions (also called “exempt” – as in exempt from overtime!) is a double-edged sword. I like the flexibility that I have to take a long lunch, come in late or leave early as long as I’m getting my work done. But I would also love to be able to take a long vacation and not have to lug my work laptop with me! =(
    Mrs. PoP recently posted…Won’t You Be My Neighbor?My Profile

    • EvenStevenMoney
      3 years ago

      It’s a give and take relationship for sure, I drop everything when I’m on vacation, but having flexibility is a nice perk.

  • I’m salaried and I don’t think enough people factor in bonuses, paid time off, stock purchase plans, 401k matches, health insurance, HSA matches, etc. into the equation. When you’re salaried you aren’t simply getting paid your “salary”, you’re getting paid a LOT more.

    • EvenStevenMoney
      3 years ago

      You bring up a good point in the career side of things. Salaried positions are more likely to get paid larger bonuses, more time paid off, and the ability for stock options. I will say that this is not the case in every position and some of the items are offered whether you are hourly or salary, I think it depends on your level within the organization as well.

  • I am on the hourly but I just got out of school so I am still working my way up. But it does give me a lot to think about in my future career. I think the salary wages has more benefits in the long run
    marty @Martys Thoughts on Life and Moneye recently posted…If you could ask a budgeting/ financial expert anything what would it be ?My Profile

    • EvenStevenMoney
      3 years ago

      I think it depends on your career aspirations, I think as a society we are taught that a salary is what means you have made it in the corporate world and I think this happens because of lower wage workers are paid salary and the managers are paid salary. Thanks for stopping by Marty!

  • Whether salaried or hourly is best, really depends on where you work and what type of work you do. As you pointed out, there is no universally correct answer.

    To back-up a bit, “salaried” means you’re paid for a job done as opposed to hours worked. This can work for you (like when you need to come in late or take a long lunch), and it can work against you (like when you’re checking emails on weekends and vacations, which I frequently do).

    Hourly means exactly that. You are paid literally for the amount of hours your rear is sitting in a chair working. You don’t have as much flexibility as to when you work, but when the work day is done…it really is done.

    At my Fortune 500 company, there is no benefits difference between salaried and hourly. Salaried people do tend to get bigger bonuses and whatnot, but the eligibility for things like bonuses doesn’t change.

    Personally I prefer being salaried. I enjoy the flexibility of being able to go to our corporate gym at 2:00pm if I feel like it, or taking a 90 minute lunch when the mood strikes. And I sorta don’t mind the extra hours I often work, because my employer is good about recognizing those people who tend to work a little harder than the norm.

    Which brings up one piece of advice I’d offer: If anyone is an hourly employee, don’t be afraid to occasionally work an extra 15 or 20 minutes, even perhaps after clocking out. Why? Because most hourly employees WON’T do this, which makes those who do look like rock stars. In fact, this is how (many years ago) I got promoted to a salaried position. I was simply willing to go the extra mile when others weren’t, and showed I was more interested in getting the work done than watching the clock.

    I realize this won’t work everywhere, but if you have a good employer who notices such things, “doing just a little more work than everyone else” is how you get ahead. And it usually isn’t hard, because a lot of people do the minimum their jobs require.

  • I personally use a combination of flat and hourly rates, which I think takes advantage of some of the pros of each option. Like you said, I’ll estimate a large project based on number of estimated hours multiplied by my hourly rate and come up with a flat fee, but then include in the proposal that additional work outside of the original proposal will be billed at my hourly rate. This allows the project scope to be flexible, but also motivates me to work efficiently on the initial project.

    • EvenStevenMoney
      2 years ago

      That’s a great point of view, I didn’t look at it from an entrepreneurs point of view, more of a W-2 Style, thanks for sharing.

  • Alex R.
    2 years ago

    I’m salaried and relatively new in my position as professional IT. My previous positions have all been hourly but all share the fact that they have been through contracts with the gov. We usually play by what they call “Big Boy Rules” so that if you work extra on a Monday, you leave earlier on a Friday for both hourly and salaried folk. If I have a Dr. appointment or something I need to go do, I can come in an hour early or leave an hour later throughout the week to make up the time while staying within 40 hours. I have experienced this through many employers.

    • EvenStevenMoney
      2 years ago

      It’s a great rule to work off of, unfortunately working in corporate america I think this rule is less of the corporate strategy for an hourly employee. Sometimes I’m convinced they have “remove the olive from the salad” and we will save millions type of conversations as it relates to hourly employees.

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