Hourly or Salary – Which is Better for Employees?

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As a business owner, it can be hard to know the best way to pay employees. Not only do you need to set a rate of pay, but you also need to decide if they will be paid salary or based on the number of hours worked. To make things even more confusing, contract workers have a completely different set of payment rules.

Mark Rowley, Owner
RandR Payroll Services

Here are a few pros and cons for you to consider, to help you choose the best payment method for your employees:

Hourly Payments

The benefit to hourly payroll is that you can manage your costs if the employees don’t put in a full week of work. This strategy allows employers to cut back on spending during the slow season. But, you need to remember that when you reduce your costs for payroll, your employees receive smaller paychecks.

The drawback to hourly payroll is that you must pay more if an employee works more. If the person is at the office more than 40 hours during the week, then you are required to pay time and a half.

Salary Payments

The benefit of salary is that the wages are predictable. These consistent earnings are helpful for business budgeting and personal budgeting for the employees. Also, many people view their job with more importance when they are paid a salary.

Employers like that they don’t have to pay overtime for exempt salaried employees. It might be nice for your business cash flow, but too much overtime could have a negative impact on the attitude of your employees. Keep in mind that nonexempt, salaried employees still need to be paid overtime wages.

Calculating Payroll

It can be a challenge to calculate payroll, especially if you have a mix of both salary and hourly employees. The easiest solution is to have a payroll service handle the details so that you don’t have to worry about the busy work. Our team at R&R Payroll & Bookkeeping Services is here to help with your payroll processing! We can customize the services to match your needs. Call to learn more: (951) 296-0412.