How do you pay your employees? Confused between Salary vs. hourly Pay Stubs? If these questions have blocked your mind, worry not because you are not alone in this; in this blog, all of your doubts shall be cleared once and for all. If you want to create a pay stub online, remember to check out Online Paystub.
Hourly Pay vs Salary
Hourly employees have several rights provided by the Fair Labor Standards Act (FLSA). Salaried employees are generally discharged from these rights.
This is where the jargon exempt and nonexempt arrives from. For the exempt scenario, an employee must have the following requirements:
- Ineligible for overtime.
- Generate a minimum amount per year regardless of hours worked.
- Perform specific job duties that the FLSA outlines.
Overtime
Hourly employees shall work a pre-determined number of hours weekly; generally, it is 40. In return , the employee gets paid a particular amount for each hour worked.
If an hourly employee exceeds 40 hours, they get paid at least 1.5 times their hourly rate per extra hour worked. These are their overtime rates.
Compared to a salaried employee, he gets paid to do a job and must work until they complete it. This means that they might work 50 hours a week, but during the next week, they will only work 35 hours.
Salaried employees is not acceptable for overtime when if they work more than 40 hours per week. The trade is that they get paid the same salary even if they work less.
Minimum Wages
FLSA says that an hourly employee has a right to a minimum wage. Those minimum wages are set by the state in which the employee works. For example, the minimum wage for South Carolina is $7.25 per hour while Nebraska is $9.00. Employers can only pay hourly employees at the minimum in various circumstances.
For example, if a waitress receives a tip, they are discharged from the minimum wage. A Salaried employee does not have a minimum wage but still must make at least $455 per week. This translates to an annual salary of $23.660.
Job Duties
FLSA also requires that an employee performs specific high-level job duties before they are exempted from their rights. Eligible job duties include, but are limited to:
- Regularly making two employees.
- Interviewing and hiring new employees.
- Decisive pay rates, hours, and job duties of other employees.
- Securing the workplace and ensuring that there is safety in the workplace.
For the exemption status, these job duties should be the primary function of the role. But as long as there are wage requirements are met, you can still have salaried employees who are not exempted from FLSA. In other words, salaried positions are not limited to management, but exempted employees are.
Calculating Gross Income
The pay stubs for hourly and salaried employees are almost identical to each other. The fundamental difference between them is the way gross pay gets calculated.
Even when you calculate the taxes, it is the same. To be clear, gross income is the amount paid to an employee before any deductions are taken out.
This is also called take-home pay. Once taxes and deductions get removed, what is left of the employee’s net pay.
Hourly Employees
Calculating the gross pay of an hourly employee is simple. You have to multiply their hourly rate by the number of hours worked during the pay period.
Example: An hourly employee works 40 hours for a pay period. Their hourly rate is $15.00 per hour. 40 regular hours X $15.00 per hour = $600.00 gross pay.
Salaried Employees
To calculate a salaried employee’s gross pay, you should determine how much of their annual salary they get each pay period. There are two steps:
Determine how many pay periods the employee has per year.
Divide the annual salary by the number of pay periods.
Example: A Salaried employee gets paid bi-weekly. There are 52 weeks in a year. So, the employee has 26 pay periods every year.
Their annual salary is $50,000 per year.
During this pay period, they have worked 80 hours, which is a general thing for a two-week pay period.
$50,000 annual salary / 26 pay periods = $1,923.08 gross pay.
As you might have noticed, overtime hours are not factored in for salaried employees. No matter how many hours they work during a given pay period, their gross pay remains unharmed.
Is Salary Better Than Hourly: Which Is Better?
This is a question that is upon you to answer. It should be answered freely for every role in your company. One of the vital benefits of salaried employees is that it grants a measure of etiology.
Research has shown that etiology in the workplace increases as job satisfaction and promotion increase.
Conclusion
In this debate of hourly pay vs. salary, it all comes down to this: No matter how you choose to pay your employees, you still have to paystub generator for them, and it must be accurate at all costs. If you want to create paystub online free, then look no further. Online Paystub is here to help you out.
