« »

Friday, February 4, 2011

Benefits of an annual salary vs. hourly wage

Hourly wage vs. annual salary
Salaried employees don't always qualify for overtime pay
To ascertain if salaried positions are more common in lucrative jobs than hourly wages is a matter of converting time into money. For example, if employee A earns $40,000 per year but works 60 hours per week, and employee B earns $30,000 per year but works 40 hours per week who earns more for their time assuming their benefits are the same and they both get 2 weeks of vacation? The answer to this question is determined by dividing annual income by the total number of annual hours. In this case $40K/3000hrs=$13.33 per hour and $30K/2000=$15 per hour. So the salaried worker is paid more, but works more hours.

The influence of vocation on income

As previously mentioned, there are also differences between salaried employees and wage employees in regard to vocation categorization. In other words, wage earners and salary earners can in some cases be distinguished by differences by what industry or line of work they are in. This is apparent in the April 14, 2010 Economic news release from the U.S. Bureau of Labor and Statistics, 'non-farm payroll wages' were a $1.48 more than production and non-supervisory employees for March 2010.(1) The BLS website has a large amount of information on the subject of vocation and income that sheds light on how salary and wage alone are not necessarily the only factor in determining total income, and therefore benefit between the two.

Gender, age, education and racial income differences

Other variables that clouds the distinction between the benefits of hourly wage and annual salary is age, gender and race. This is demonstrated in the U.S. Bureau of Labor Statistics 2008 demographic based income data.(3) For example, according to the BLS, on average a Hispanic woman who earns a salary is less likely to earn more than a Caucasoid male who earns an hourly wage. Similar relationships and differences can be drawn between genders as well. For example, in some professions, the majority of Women receiving a salary may on average receive less income per year than the majority of men earning an annual income via hourly wages.

Income levels and employee benefits

Salaried employees do tend to have higher incomes in some professions than hourly waged employees. For example, chart 4 of source 3 indicates a professional woman is more likely to earn a higher salary than a man or woman whose hourly wages are in the service industry.(3) Additionally, in some cases, salaried employees are more likely to have careers that include benefits such as 401(k) or 403(b) retirement plans.

This is not always the case however, as wage employees may also receive benefits depending on how in demand their skills are, and what type of work they are doing. For example, plumbers who have completed their apprenticeship can make hourly wages in excess of $20.00/hour in addition to receiving medical benefits as part of their employment agreement.(2) The same is true for some truckers under the employment of trucking companies. In light of this, the benefits of being salaried are not always a clear cut line because there are variations between professions.

Flexibility and time management

One of more distinct benefits of annual salaries vs hourly wages is the flexibility one has with time worked. Essentially, on a salary, an employee is expected to meet a certain level of productivity within a more general range of time. In such cases salaried employees do not necessarily have to report where they are as much as what they have done. Due to variations in the labor market there are natural differences between the way companies and organizations handle the issue of time management. Suffice to say, with hourly wages it is explicit that one is working by the hour.

The benefits of annual salaries vs hourly wages are shaped by the businesses that implement standards by which their employees are generally obliged to follow. Whether that obligation arises out of necessity or interest can also influence the benefits. To illustrate further, a company that seeks to increase retained earnings through aggressive cost cutting may quite possibly include the work of employees in that cost cutting. This means more work for less money, an increased amount of work for the same money or longer hours in which case the salaried employee is at a disadvantage in terms of time management.

To say earning a salary has more benefits than an hourly wage is a non-sequitor or a foregone conclusion that is not always substantiated by the facts. This is because income levels are also determined by vocation, geographic location and skill levels. There are however, specific distinctions that do separate salaried positions from hourly positions in terms of time management. While the former is more flexible, it may also entail a greater amount of total work per dollar of employment.

There are benefits of annual salary just as there are advantages to an hourly wage, however the distinction between the two is obfuscated by other factors such as age, gender, race, education and occupation. When the benefits of annual salary and hourly wage are distinct, this is sometimes in contrast to one another, but at other times are not mutually exclusive i.e. both salaries and hourly wages may have similar benefits in some cases. For example, with an annual salary one may be required to work an untold number of hours to complete a task, or set of tasks; yet with an hourly wage, one is paid overtime for work outside the typical work period.

Image license: Geralt/Pixabay, US-PD