The two main categories of employees are salaried and hourly wage. Employers usually classify nonmanagement positions as hourly wage. Salaried employees earn a set pay per week or per month, regardless of how few or how many hours they work. Hourly employees earn pay only for the number of hours they work, and this method has advantages and disadvantages for employer and employee.
Hourly employees generally earn significantly less than their salaried counterparts do. This enables the company to achieve its goals at a lesser cost. The exception would be hourly-wage employees who are better paid and consistently work overtime hours. However, an employee who earns an hourly wage of $9 has an overtime pay rate of only $13.50. This is much less than what the company would pay a salaried manager.
Businesses perceive hourly workers as less valuable, and easier to replace, than management. However, low-paid employees may be less motivated to stay with the company once they achieve a higher level of expertise. The loss of knowledgeable and experienced employees results in lower productivity and possibly lowers profits for the company.
Businesses offer hourly employees a reduced benefits package, compared to what executives receive. Hourly employees pay toward their health insurance premiums and may have a lower-quality healthcare plan that limits doctor options and patient choices. Some companies give hourly employees only one or two weeks' vacation each year and may restrict the available dates. The lesser offerings to hourly workers save the company money only if they can retain their staff; recruitment and training of replacement employees cut into any potential savings.
Unlike their European counterparts, hourly employees in the United States rarely have work contracts, especially in states with right-to-work laws. While state and federal laws regulate safety conditions, minimum wage, abuse, unpaid work and other employment situations for hourly employees, these employees can be dismissed without cause regardless of their length of employment. The reverse is also true: Your employees can quit their jobs without giving notice, resulting in a negative impact on your company.
Hourly employees may feel less secure in their jobs, especially if you schedule full-time workers for less than 40 hours. While managers earn the same amount of money regardless of company slowdowns, hourly employees suffer when they work fewer hours. The company saves money by not paying them when there is no work to do, but it also takes the chance that another business will hire away its most talented workers.
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