The Fair Labor Standards Act regulates nearly all jobs in the United States. The act ensures that employees receive fair treatment, are paid appropriately and are legally covered if an employer fails to comply with legal standards.
The FLSA has defined the requirements to determine whether an employee is eligible for exempt employment status or non-exempt. All employees must perform their required tasks and duties during their scheduled work hours regardless of employment status.
Hourly vs. Salary: What is the Difference?
The Fair Labor Standards Act of 1938 standardizes the structure of any given job within the United States. The FLSA declares that all employees, regardless of tax exemption status, must receive at least minimum wage and overtime pay when applicable and strictly prohibits minors from working. In addition, the FLSA determines if an employee meets the requirements for hourly (non-exempt) wage or salary (exempt).
Hourly employees will receive their agreed-upon wage and be paid based on their hours worked during the week. In addition, hourly employees will receive overtime pay whenever they work over 40 hours within one pay period. Usually, their overtime pay is at time-and-a-half.
Salary employees receive a set wage that is not dependent on the hours worked. Salaried pay periods are either weekly, bi-weekly, or monthly. In addition, an employer cannot determine if an employee is exempt or non-exempt. However, the FLSA has set requirements for an exempt employee. The guidelines state that salaried employees must spend at least 50% or more of their time at work performing specific duties that require independent judgment and discretion.
The main difference between the two wage structures is that salary employees do not get to benefit from overtime pay, and their work week can exceed 40 hours.
Hourly Pay: Pros and Cons
As an hourly employee, your pay depends on the number of hours you worked during a pay period. In addition, hourly employees need to track their hours, accurately document them, and report them to the designated individual.
There are many benefits to being paid an hourly wage, including the following:
- Your hourly pay is something that you and your employer agreed on.
- Your hourly pay needs to be equal to or higher than the set minimum wage, which can vary from state to state.
- You'll receive overtime pay if you exceed your 40-hour work week, which is time-and-a-half.
Though hourly pay has its benefits, there are some drawbacks, including:
- Your income isn't stable -- you could easily miss shifts or work fewer hours.
- Your benefits might be lower when compared to a salaried employee.
Salary Pay: Pros and Cons
One of the most enticing perks of being salaried is the potential to work a more flexible schedule while maintaining a consistent paycheck. But ultimately, the FLSA determines if your duties qualify you as a salary-earning employee.
Some of the benefits of being an exempt employee include the following:
- A consistent paycheck regardless of hours worked.
- A more flexible schedule.
- The ability to miss work due to illness, injury, or other reasons without experiencing a cut in pay.
- A benefits package.
Despite the advantages of being salaried, there are still some drawbacks, including:
- You may exceed your 40-hour workweek while not receiving any overtime pay.
- Your work and personal life tend to blend more due to constant contact with your office.
Takeaway
Earning a wage, whether hourly or salaried, has many benefits. Salaried employees are often more secure in their position than hourly employees, as hourly earners may have their employment terminated during times of uncertainty.
Depending on your employment agreement, hourly employees may be guaranteed to earn more than their hourly wage due to overtime pay. However, their paycheck can vary since it uses their hours worked to determine the amount. On the other hand, salaried employees will have a consistent set of pay until they get a raise or have a promotion.