When Is an Hourly Rate Preferable?

Hourly rates may benefit both the employer and employee.
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Knowing when to stay at an hourly rate or move to a salaried position is often confusing. The benefits of hourly rates differ for employees and employers. Hourly employees are non-exempt, which means they are able to earn extra pay for working overtime, while salaried positions are usually exempt. Once you have a strong understanding of hourly rates and salary rates, then you have a better chance of making the right decision for yourself.

When Overtime is Mandatory

The U.S. Department of Labor details that the Fair Labor Standards Act requires employers pay workers time-and-a-half for working upward of 40 hours a week -- and double-time for working on holidays. For instance, hourly workers expected to work from home on weekends or on their days off may get paid more. Salaried workers are exempt, however, and don't earn anything extra for their overtime or holiday efforts.

Non-managerial Position

Regular employees not in a mangement position should find hourly rates more preferable. The added responsibilities of management -- supervising other workers, the ability to hire and fire -- brings extra money and makes them eligible for salary. The need for a salary position is due to the manager having responsibilities that directly affect the company and may require her attention in her off-hours. Non-managers are better off in hourly positions, as they have the potential to earn more for their extra efforts.

Part-Time Schedules

For employers with business that are only open a few hours a week, or who want to cut down on health insurance and paid vacation benefits, offering an hourly rate for part-time workers may be preferable. This enables the employer to cut down on benefits offered to salaried employees, such as the aforementioned ones, and allows the business to save money by paying only for the time the employee is actually at work.

Contract Projects

Freelancers working on an ongoing project may prefer to be hourly. This is because long-term projects may be difficult to gauge the amount of work needed to complete, and by offering an hourly rate, the freelancer will know that she is getting what she deserves for every hour of work she puts in.

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