In New Jersey and Pennsylvania, most employees are paid on either an hourly or salary basis. Employees are generally classified based on the way that they are paid and the types of work that they perform. Understanding the difference between an hourly and salaried worker is important. Both types of payment systems have drawbacks and benefits. Swartz Swidler can help you to understand your rights whether you are paid by the hour or by salary.
What is an hourly vs. salaried employee?
If you are an hourly worker, you are paid a specific rate for each hour that you work. If you work more than 40 hours during a week, you should receive an overtime premium for each hour above 40 worked. If you are a salaried worker, your company likely does not pay you overtime when you work more than 40 hours during a week. Salaried employees earn a set amount each week regardless of the number of hours worked. However, salaried employees typically receive more substantial benefits from their employers than hourly employees receive.
Hourly employee pay
Employees who work on an hourly basis receive a set rate per hour. This rate is then multiplied by the number of hours that the workers worked during a pay period. For example, if a worker earns $15 per hour and works for 40 hours during a week, he or she would earn wages for that week of 40 x $15 or $600.
The Fair Labor Standards Act classifies most hourly employees as non-exempt workers. Employers must also pay non-exempt employees overtime compensation when they work more than 40 hours in a week, which is calculated at 1.5 times the hourly rate for each additional hour worked.
If an hourly employee who has a regular hourly rate of $15 per hour works 50 hours during a workweek, he or she will be paid for 40 x $15 for the first 40 hours plus 10 x $22.5 for the subsequent 10 overtime hours or $600 + $225 for total earnings of $825 for the week.
Hourly employees may not be guaranteed that they will receive a specific number of working hours each week without a labor contract. Instead, an hourly employee’s hours might vary from week to week. Some employees work different shifts each week, and their hours might differ from week to week.
While the federal minimum wage is $7.25 per hour, some cities and states have a higher minimum wage. For example, New Jersey’s state minimum wage is currently $12 per hour as of Jan. 1, 2021. In states and cities with a higher minimum wage, hourly employees must be paid at least the state’s or city’s higher minimum wage instead of the federal minimum wage for each hour worked.
Salaried workers’ pay
Employees who are paid on a salaried basis receive a set amount of compensation. The annual amount is divided by the pay periods during the year to calculate the weekly, monthly, or bi-weekly paycheck.
For example, if an employee earns a salary of $60,000 per year that is paid on a weekly basis, he or she will receive $1153.85 per week before his or her deductions are subtracted. If the salaried employee is also an exempt worker, his or her amount will not increase regardless of the number of hours he or she works during a week.
Exempt salaried employees
Many workers who earn a salary are also exempt. this means that they are not entitled to overtime pay. Employers usually do not track the number of hours that a salaried exempt employee works or provide extra compensation when the worker works more than 40 hours.
Some employers will pay overtime to some of their salaried employees. Others might offer compensatory time off from work or provide other types of benefits in lieu of overtime pay. Some occupations are exempt even when they are paid an hourly wage, including IT professionals.
Non-exmpt salaried employees
Salaried employees who are non-exempt under the provisions of the FLSA must be paid overtime compensation for all hours worked above 40 in a week. Since Jan. 1, 2020, salaried employees who earn less than $684 per week must be classified as non-exempt employees who are eligible for overtime compensation. They must also be classified as non-exempt if they do not meet the Department of Labor’s standards for exempt employees.
Calculating your paycheck
Paycheck calculators can help you to calculate how much you will earn for each paycheck. They include the portion of your earnings that will be deducted for federal and state income taxes and FICA. Using a calculator can help you to get a realistic idea of your take-home pay whether you are paid by the hour or a salary. Using a paycheck calculator can also help you to make certain that your employer is taking the right amount of money in deductions from each of your paychecks.
Benefits of hourly positions
If you work as an hourly employee, you might be able to earn more than you might if you worked as a salaried employee when you are able to work a lot of overtime hours. Working as an hourly employee also helps you to know that you will be compensated for each hour that you work. By contrast, however, working as an hourly employee might mean that you do not enjoy the same types of benefits as salaried employees. If you work different shifts each week, you might work more hours during certain weeks than others and earn different amounts each week.
Benefits of salaried positions
If you work as a salaried employee, you might enjoy greater benefits than you would as an hourly worker. Many salaried positions come with benefits like 401(k) plans, health insurance, compensatory time, short- and long-term disability benefits, and others.
Salaried employees might have the ability to move up the ladder in more ways than hourly employees. Some people also enjoy knowing how much they will be paid each week or month. However, if you are an exempt salaried employee, you will not be paid overtime no matter how many hours you work in a week.
Get help from an experienced employment lawyer
If you are an hourly employee who has not received all of the pay that you are owed or are a salaried employee who believes that you have been misclassified as an exempt worker, you should talk to an experienced employment lawyer. Contact Swartz Swidler today for a consultation by calling us at 856.685.7420.