The U.S. Bureau of Labor Statistics reports that 73.3 million workers were paid an hourly wage in 2020, representing 55.5 percent of all workers. Of these hourly workers, about 1.1 million received pay at or below the federal minimum wage of $7.25 per hour, making up 1.5 percent of all hourly workers.
Being paid a salary isn’t necessarily better than an hourly wage. Each type of compensation comes with benefits and drawbacks.
Working for a Salary
Employees who work for a salary receive a consistent paycheck in exchange for a fulfilling the duties of a full-time position. They may be paid weekly, bi-monthly, monthly, or even annually. The amount of money an exempt employee is paid typically depends on education level, skills, and related work experience. Each salary payment is the same until a change is made by the employer.
Salaried employees are expected to keep up with their assigned work, even when the workload requires them to work overtime hours without compensation. In exchange, they may be allowed to decrease their hours to less than 40 per week when work is lighter. The bottom line: the employer is given a great deal of discretion about the number of hours needed per week for a salaried job. Many salaried employees find it hard to maintain a work-life balance when their job requires frequent overtime.
According to the FLSA, salaried (exempt) employees must meet certain criteria besides receiving a fixed wage. They must be paid at least $684 per week and perform duties that require independent judgment at least half the time. In most cases, the job includes supervisor or manager duties. Jobs that require advanced scientific knowledge may be classified as salaried. Computer professionals and creative professionals also may be paid by salary.
Working for Hourly Pay
Hourly (nonexempt) employees must be paid for every hour worked. When they work more than 40 hours in a single week, they are owed overtime pay at a rate of 1.5 their standard pay rate. Some employees have contracts that provide even higher pay for working on holidays. In fields that pay well, an hourly worker who logs plenty of overtime can make more than a salaried worker who works overtime without added pay.
Hourly workers have the advantage of not having to work hours for which they’re not being paid. However, many hourly positions don’t receive benefits like paid vacation and health insurance. During business downturns they face the risk of having hours cut, while a salaried position provides the security of a guaranteed wage.
Wage and Hour Labor Laws
Federal laws related to jobs are enforced by the Wage and Hour Division (WHD), which was formed in 1938 to oversee the Fair Labor Standards Act (FLSA), a law that “establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.”
It should be noted that the FLSA doesn’t draw a distinction between full-time and part-time employment, though state governments and employers may have their own rules in this regard. The benefits and protections provided by the FLSA applies to all workers, regardless of the number of assigned hours.
Most states also have wage and hour laws covering everything from overtime and minimum wage to paid breaks, parental leave, and unemployment benefits. The Department of Labor enforces federal labor laws; employers who break federal laws risk federal prosecution. State labor laws are enforced and prosecuted by state agencies. When there is a conflict between federal and state labor laws, employers must follow the law that is most beneficial to the employee.