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Time is money, but when it comes to your paycheck, whether you get paid on a salary or hourly basis can make all the difference. We tackled the hourly vs. salary debate from a worker’s perspective, asking ourselves a simple question: Which is better for the average employee?

The Difference Between Salary and Hourly Pay

It seems simple enough. Each pay period, salaried workers get paid a set amount, whereas hourly workers are paid based on how many hours they work. But there are a few additional intricacies — like overtime and benefits — that make the two pretty different.

Salaried Payment

  • Guaranteed, consistent paycheck

  • Paid the same amount regardless of the number of hours worked

  • Employer-sponsored benefits such as health insurance and retirement

  • More stability and job security

Hourly Payment

  • Pay fluctuates depending on how many hours you work

  • Eligible for overtime pay (at least base wage plus 50%) after surpassing 40 hours per week

  • Fewer benefits

  • Employers can easily reduce your hours

Gallery: The Most Satisfying Jobs That Also Pay Well

Group of Asian white collar worker having a break taking snack at the workstation office togetherPhoto credit: Edwin Tan /istockphoto

The Difference Between Exempt and Non-Exempt Employees

The Fair Labor Standards Act (FLSA) offers protections (such as mandatory overtime pay) for employees who are non-exempt. That’s an overcomplicated way of saying that the government makes sure that hourly workers get a minimum wage and overtime pay.

On the other hand, most salaried workers are exempt, meaning that they are not eligible for overtime. That said, some salaried workers, namely those making less than $684 per week or $35,568 per year, may be eligible for overtime pay.

To classify as an exempt employee under the FSLA, you must:

Which Is Better: Hourly or Salary?

While we know it’s more satisfying to come up with a straightforward answer, the truth is that there are pros and cons to both hourly and salaried jobs. The conventional wisdom is that salaried jobs are better, in part because they’re associated with more prestigious, higher-paying work. And if you're chasing the highest paying jobs, you'll likely end up with a salaried position. But employers can also take advantage of exempt salaried employees.

Imagine, for example, you have a tyrannical boss, Mr. Taskmaster, who pays you a salary but makes you work well over 40 hours a week. Because you’re an exempt worker, Mr. Taskmaster can milk you for every last dollar he’s paid you and you won’t be protected by the FLSA. (Pro tip: Join a union and/or renegotiate your pay.) Or you might have a chill boss who wears flip flops around the office and only asks you to work 30 hours a week, regardless of your cushy salary.

The bottom line: There's no simple answer, as it depends on what you want from your job and employer.

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