Salaried vs. Hourly Worker Classifications

If you’re running a business, it’s important to take a close look at how you’re classifying and paying your workers in order to make sure that you are complying with all state and federal employment laws. Mis-classifying workers can lead to legal action or money owned down the line. The different employees of a company are primarily categorized by the type of work they do and how they are paid.

The largest distinction between salaried and hourly employees is based on the type of work done by these employees and their status as being exempt or not exempt from overtime. If an employee is paid hourly and they work more than 40 hours a week, they may be eligible for overtime pay, which will be determined by different state laws.

What is an Hourly Employee?

Hourly workers a different from full-time salaried positions primarily because they are paid a set hourly amount with no set amount of hours per week. Examples of hourly employees could be contingent workers, flexible workers, consultants, and even freelancers. An employer can determine exactly how many hours per week this employee is needed and this can flex over time. Hourly workers traditionally use timesheets to record the time workers. Workforce management systems can be especially helpful for this process by automating timesheet submissions and capture accurate time and attendance for each shift worked.

Other important characteristics of an hourly employee include:

Hourly workers use a timesheet to record their hours worked.
Hourly workers can be BOTH full-time who work 40 hours a week or part-time who work less.
They have different pay rates, time off, and benefits exist from a salaried worker.
Their schedules can vary but are set by the employer.
If hourly employees work more than 40 hours per week, the Department of Labor requires those workers be paid overtime.

What Laws Determine if an Employee is Salaried or Hourly?

There are some key differences between hourly and salaried employees. A salaried employee has their compensation set at the beginning of the year and receives weekly (or bi-weekly) payments. They’re also receiving healthcare benefits, paid time off, holidays, and other benefits. They are also exempt from overtime. Federal and state laws require paying hourly employees overtime but not salaried employees.