The Legal Difference Between Earning a Salary and Being Paid Hourly

February 15, 2016

When you get a job offer, you should consider how your salary will be paid as well as what other benefits come with the offer. It is important to know whether the job will be paid on an hourly or a salaried basis. Hourly employees are always entitled to overtime wages salaried employees are usually, but not always entitled to overtime pay. However, some salaried positions are exempt from overtime. These positions are normally executive or management type job. Overtime pay makes a difference. As odd as it seems, it is possible for an employee to take a pay cut when they are promoted to a salaried position that is exempt from overtime.

Hourly

The Fair Labor Standards Act (FLSA) is a federal law that sets national minimum employment standards. Individual states are free to pass laws which provide their citizens with greater protections than are provided by federal laws. However, Georgia does not have any additional wage laws, so whether an employee is entitled to overtime wages is governed by the FLSA. If the position is paid hourly— you can expect to be paid at an hourly rate (which under Federal law must be a minimum of $7.25 per hour).If you are paid a salary in a non-exempt job (like secretarial support or computer technician), then your salary must be equal to at least the number of hours you work multiplied by $7.25 per hour.

Whether an employee is entitled to overtime wages depends on a whether their employer is required to comply with the FLSA. It also depends on whether their position is exempt from overtime pay. Under the FLSA, hourly employees are by definition non-exempt, meaning that they are not exempt from the minimum wage and overtime provisions of the law. Whether a salaried employee is non-exempt requires a little more diligence from an attorney who works in the area. Some guidelines can be found here. When a non-exempt employee works more than forty hours in a week (defined as seven consecutive worked days) the employer must pay the employee one and one-half times their regular rate of pay for every hour over forty worked that week. Some states have daily overtime limits, which entitles any employee who works for more than a certain number of hours in a single day to be paid overtime. However, Georgia does not have a daily overtime limit. Instead, Georgia computes overtime on the basis of total hours worked for the week, consistent with federal law.

Hourly employees may be offered fringe benefits that could include: health insurance, time off for holidays, paid or unpaid vacation time, sick days, and severance. However, those are not required by the FLSA and would have to be voluntarily offered by the employer.

Salaried

A salaried position pays a set amount of wages for a particular position, regardless of the number of hours worked. Generally, an employee is expected to complete assigned duties during the work week. Employees paid on a salary basis can be exempt from the FLSA act under certain circumstances. If a position is deemed to be “exempt,” employers are not required to pay overtime wages for hours worked in excess of forty hours in a week.

Regular bonuses do not change an employer’s obligation to pay overtime. Instead, bonuses actualy increate the hourly rate required for the overtime calculation. Salaried positions also typically come with a fringe benefits package that consists of health care, stock options, pension, retirement, sick time, paid vacation, and severance. However, there is no federal or Georgia legal requirement for employers to provide these benefits. They are voluntary and can be added to help ensure companies are able to compete and hire the best candidates. However, the Affordable Care Act does penalize companies with more than 50 employees that fail to make health insurance avaialble.

For any additional questions on hourly v. salaried wages, learn more about the United States Department of Labor, the State of Georgia Department of Labor, or reach out to PCW Law Firm.