Benefits of an Annual Salary Versus an Hourly Wage

Salaried positions are generally thought of as better than those paying an hourly wage, although there are, in fact, potential benefits and drawbacks of both, largely depending on the industry.

Increasingly, businesses tend to avoid offering full-time wage positions, preferring instead to offer part-time contracted hours and overtime as appropriate. In essence, many wage earners are working full time but only receiving the benefits, holiday time and sick pay of part-time employees. Salaried positions have no such problems and are very rarely anything less than guaranteed full-time hours.

Because salaried positions are somewhat harder to fill than hourly wage positions, greater job security in times of recession is another benefit of the former over the latter. On the flip side, there is a lot more competition for salaried positions, so finding employment can be more difficult in poor economic conditions for someone aiming for a salaried position.

The one main benefit of working for a wage rather than a salary is the potential to earn more than your set wage through overtime. Most salaried positions, while often containing other means of attaining extra remuneration such as targets or commission, tend not to pay for overtime; when you work over your contracted hours, you do so without being paid for it.

For example someone earning a $25,000 salary per year at 40 hours per week is approximately earning just over $12 per hour. If, however, they put in a 50-hour workweek, their pay rate drops to $9.60 per hour. At the same firm, another individual is paid a wage of $10 per hour for a 40 hour week, equating to $20,800. If they also have the ability to accrue overtime of 10 hours per week paid at 1.5 times their normal wage, equaling a further $7,800 per year. So while the salaried position might at first glance appear to be the more lucrative, the worker being paid wages is, in fact, better off.

Of course this example doesn’t factor in benefits attached to either position. For example, a salaried employee may receive more paid vacation time, have access to share options, receive paid rather than voluntary health insurance, or other benefits, such as company cars and expense accounts.

While most salaried positions tend to be higher positions within businesses than wage positions, there are numerous examples of salaried positions being taken advantage of through the lack of overtime. Often junior management positions for example may require much more than the salaried hours in order to keep up with the workload, often meaning that, like for like, they are paid less than workers.

Similarly, working over holidays or unsociable hours will often pay higher rates for wage earners than salaried positions. A worker on a night shift might be paid at 1.5 times their normal wage for doing so for example, while a salaried supervisor on the same shift will likely be paid no more than his daytime counterpart.

Generally however, other than the most junior salaried positions, this disadvantage is outweighed by the fact that salaried positions tend to be much more lucrative than positions paid by the hour. Not to mention that unquestionably there are much better chances for advancement from salaried position than there are from wage positions.

In most first world countries, the gap between the rich and poor is also growing at an alarming rate, meaning that attaining the highest positions within companies will like for like become more lucrative than they are now. The best and in many cases the only way of attaining these is to progress through lower salaried positions.

The day to day differences in the working conditions also tend to favor salaried positions over wages. Salaried positions often allow for much more anonymity, and allow greater scope for individual approaches to workload, time management and the like.

Managing money is also easier with salaried positions given that you know ahead of time what you are going to be bringing home each and every month. While wages give greater scope for earning a larger percentage extra each month on top of your basic pay, managing money if for example you have been absent due to illness is tricky since many companies will tend to dictate that the first few days of any absences are unpaid for non-salaried employees.