What’s More Productive, Hourly Pay or Salary? Six Pros and Cons

“When an actor comes to me and wants to discuss his character, I say, ‘It’s in the script.’ If he says, ‘But what’s my motivation?, ‘ I say, ‘Your salary.’” – Alfred Hitchcock, British film director.

If you’re a white-collar professional, you’re more likely to receive a salary rather than hourly pay. Salary is de rigueur for upper management, of course, but for some professionals, that’s not always the case. Coders, illustrators, writers, and others sometimes receive hourly pay rather than salaries, especially in volatile job markets. And while salaries have remained the professional norm for the past century, there’s no guarantee this will always remain true, especially as we continue to move toward more virtual work environments.

So there may come a time when you face the option of choosing between a salaried and hourly position, with most other things being equal. Here are six pros and cons to consider if you’re ever offered the choice.

  1. Salaried jobs offer more opportunities for advancement. Hourly employees tend to hit an earnings ceiling relatively quickly; ultimately, there’s not much difference in pay between a senior worker and a foreman, for example. If you prefer the opportunity to take on greater challenges and increased responsibility, and the potential to forge greater change in your company, a salaried position is the way to go. If you prefer to go home at the same time every night and a higher per-hour rate of pay, opt for hourly when you can. Salaried workers typically work longer hour than hourly workers because they must or feel they must.

  2. Hourly workers can get overtime. Salaried workers are exempt from overtime pay, so their supervisors can ask them to work longer hours without having to pay them extra money (though they may receive other monetary rewards later). Hourly workers can only work 40 hours per week before they must be paid 1.5 times their normal rate (time and a half) for any overtime. They may not get overtime, though, if the employer doesn’t allow it.

  3. Salaried workers generally have better benefits. Nearly all full-time jobs come with the basic two weeks of PTO and some form of personal insurance. But most employers sweeten the pot for salaried worker by providing things like retirement-plan matching, more insurance options, more PTO, better opportunity for advancement, and the possibility of bonuses and other rewards.

  4. Hourly workers often have a better work/life balance, since they work a specific number of hours per day, leave at the same time daily, and can structure their schedules with less possibility of disruption. But if the office closes early, they lose income, whereas salaried people do not.

  5. Salaried workers can count on the same pay per check, no matter what. This reduces uncertainty, though it may also reduce their per-hour rate, since most salaried individuals work more than 40 hours per week. Plus, they can usually take a few hours off (say, to go to the doctor) without losing pay.

  6. Hourly workers are less likely to be asked to work extra hours. This feeds into a greater control of work/life balance, but whether they’re asked to work overtime may depend upon time of the year and industry. And while overtime and a larger paycheck may be a possibility, some employers go to great lengths to avoid overtime for non-exempt workers.

A Better Tomorrow

So: knowing all that, what’s better, hourly pay or a salary? Which actually makes people work harder? It all depends on the worker. Both options have their upsides. Workers who prefer stability over advancement and greater responsibility prefer to be non-exempt and hourly, as they have more control over their time and work-life balance. Conversely, situations beyond their control, from strikes to weather to management decisions, may limit the number of hours in a particular week a non-exempt worker earns, endangering their income. They can be tempted to work longer and harder with overtime pay, but overtime can be less productive for the business, as higher labor costs cut into profits.

Other workers prefer the predictability of a salary, since pay and benefits are always the same no matter what — though this comes with the proviso that no matter how many hours you work, you get paid the same. Salaried employees almost always work over 40 hours per week, since the organization can take advantage of their exempt status. In some cases, the lack of a work-life balance can become unbearable.

As with so much in life, the answers here depend on what you want out of life and work. Think deeply if you’re ever offered the option… and consider carefully which career path fits better with your lifestyle.

About Laura Stack, your next keynote speaker:

© 2019 Laura Stack. Laura Stack, MBA, CSP, CPAE is an award-winning keynote speaker, bestselling author, and noted authority on employee and team productivity. She is the president of The Productivity Pro, Inc., a company dedicated to helping leaders increase workplace performance in high-stress environments. Stack has authored eight books, including FASTER TOGETHER: Accelerating Your Team’s Productivity (Berrett-Koehler 2018). She is a past president of the National Speakers Association, and a member of its exclusive Speaker Hall of Fame (with fewer than 175 members worldwide). Stack’s clients include Cisco Systems, Wal-Mart, and Bank of America, and she has been featured on the CBS Early Show and CNN, and in the New York Times. To have Laura Stack speak at an upcoming meeting or event, call 303-471-7401 or contact us online.

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