In simple terms, an hourly employee refers to a worker who gets paid on the basis of their actual working hours. These employees get hired by negotiating an hourly rate and are often given overtime opportunities.
Only the employees who are hired to work on an hourly basis are considered hourly employees.
According to the U.S. Department of Labor, the biggest difference between a salaried employee and an hourly employee is the hourly rate.
A regular employee earns a salary on a weekly or monthly basis, but hourly employees are paid based on their working hours.
First, an hourly pay rate is negotiated between the employer and an employer. But an employer must follow the minimum hourly rate set by the federal government while negotiating salary. It’s important to mention that this wage rate can vary from one state to another.
After that, the given wage rate is multiplied by the hours worked by the employee. For instance, if an employee worked for 10 hours at an hourly rate of $8, the total wage would be $80.
No restriction is set regarding the total working hours of an hourly employee. They can work as many hours as possible, but there’s a rule regarding the weekly working hours.
According to the Fair Labor Standards Act (FLSA), workers can work 40 hours weekly at a regular hourly rate. After that, a worker must be paid 1.5 times the regular salary, as those hours will be considered overtime.
An hourly employee should be getting the same amount of benefits as a regular employee of an organization. But it mostly depends on individual companies and their strategies. Usually, the benefits of hourly employees include life insurance, retirement plans, paid vacations, etc.
An employer can enjoy a wide variety of benefits by hiring an hourly employee. They are:
As an employer, paying workers based on their working hours can save your company a lot of money. In this way, You won’t have to pay the employees for their idle time as you’ll pay them only for their active hours.
Hourly workers get more flexibility in their jobs as they get to choose how many hours they’ll work. This kind of freedom increases an employee’s quality of life.
If hourly workers complete 40 hours of work in a week, they’ll have the opportunity to do overtime. Overtime allows these workers to earn more with an increased wage rate.
Besides the advantages, hiring hourly employees also has some potential drawbacks. They are:
The hourly rate often goes up and down depending on the demand and other factors. As a result, employees often face uncertainties and frustrations with their overall income.
Hourly jobs also face the highest amount of layoffs in many countries. That’s why hourly jobs have the least amount of job security. Besides, hourly jobs have less employee retention as many employees seek regular jobs.