Salary vs. Hourly Pay

Salary and hourly pay are two common ways employers compensate employees. A salaried employee receives a set amount of pay over a defined period, while an hourly employee is paid based on the number of hours they work.

Hourly pay can change from one paycheck to the next depending on hours worked, overtime, shift differentials, or other pay adjustments. Salary pay is generally more consistent from pay period to pay period, although deductions or additional compensation may still affect the final amount.

Being salaried does not automatically mean an employee is exempt from overtime. A salaried employee may still be nonexempt and entitled to overtime pay if the position does not meet the requirements for an exemption under the Fair Labor Standards Act. Hourly employees are commonly nonexempt, but pay method alone does not determine classification.

For nonexempt employees, employers need to track hours worked and pay overtime when required. Under federal law, covered nonexempt employees generally must receive overtime pay for hours worked over 40 in a workweek. State and local laws may add their own requirements.

Frequently asked questions

What is the difference between salary and hourly pay?

Salaried employees generally receive a set amount of pay for each pay period, while hourly employees are paid according to the number of hours they work. The way an employee is paid does not, by itself, determine whether overtime requirements apply.

Do salaried employees get overtime?

They can. A salaried employee who is classified as nonexempt may still be entitled to overtime pay. Whether an employee is exempt depends on the requirements of the applicable exemption, not simply whether they receive a salary.

Do hourly employees always receive overtime?

Not automatically. Covered nonexempt employees generally qualify for overtime after working more than 40 hours in a workweek under federal law. Simply being paid hourly does not mean every additional hour is paid at an overtime rate.

Is salary or hourly pay better?

Neither pay method is automatically better. The right approach depends on the job, expected schedule, business needs, and applicable wage and hour requirements. Employers should choose a pay structure that fits the role and classify the employee correctly.