At first thought, switching from an hourly job to a salaried job seems like a no-brainer. Receiving fixed payments on a regular basis, regardless of your day-to-day workload, is a more secure way to earn a living.
Also, salaried jobs usually come with benefits that you don’t get with hourly gigs, such as health insurance, paid time off, and retirement fund contribution matching.
But this decision isn’t as easy as it may seem. There are downsides to salaried jobs and other things you should think about before you make the switch, such as:
Nonexempt vs. Exempt
Not all salaried jobs are the same. Businesses in America are required to follow the rules established in the Fair Labor Standards Act, which makes a distinction between nonexempt employees and exempt employees.
Nonexempt employees are not exempt from the overtime rule. That means their employers must pay them time-and-one-half (150% their normal rate) for all the hours they work in excess of 40 hours per week.
Exempt employees are exempt from the overtime rule. No matter how much time they spend working, they can only make their fixed salary.
So, if a salaried job is exempt, then it’s probably not worth your time. In fact, it’s a recipe for disaster. Your boss might ask you to stay late again and again, knowing that the extra hours won’t affect the company’s bottom line. And sure, you could say “no” to these requests, but what would that do to your job security? This is not a situation you want to put yourself in.
Can You Stick To Someone Else’s Schedule?
But even if the salaried job you’re considering is nonexempt and pays you for overtime work, there are still reasons why you might want to be paid hourly instead.
The best part of an hourly job is the freedom – especially if you work remotely. Sure, you have assignments you need to complete, but you can do it at your own pace, on your own schedule.
If you want to spend all day alternating between work and breaks, you can do that (and your breaks can run as long as you want). If you’d like to do whatever you want most of the day and then cram all your work into one window… well, that may not be wise, but you can do that, too. The choice is yours.
You won’t have that freedom as a salaried employee. You’ll be required to clock in and clock out at the same times every day. There are people who actually like this kind of structure and routine. Are you one of them?
The Social Factor
Another difference between a remote, hourly position and an in-person, salaried position is that, with the salaried position, you need to be around your co-workers all day.
Some people prefer working in an office rather than at home. They find that it’s easier to avoid distractions and stay productive when they work in a social setting, or they just enjoy being around other people. Working alone at home can feel a little sad. Many remote workers pay hundreds of dollars per month for a co working space membership to get those social benefits of an office setting.
In addition to the general concept of being social, you must consider what it will be like to interact with the specific people at the salaried job Team-building is important for both managers and the workers that report to them. You’re not going to be happy at your job if you don’t like the people you work with. Before you join the team, see how well you get along with the other members.
The Stress Factor
Let’s bring it full circle. In the first paragraph of this piece, I touched on the biggest advantage that a salaried job holds over an hourly job: you know exactly how much you’re getting paid every month.
This point deserves more attention. The consequences of financial instability can be devastating.
The majority of Americans have less than $1,000 in savings. They need a constant stream of income to keep up with their expenses. Hourly work ensures you get paid for all the time you put in, but what do you do when the workflow dries up? A big project might end before you expect it to end, and then you’ll be desperate for another source of work.
Even if you’re able to keep a roof over your head, constantly worrying about your bills leads to anxiety and depression, and these mental conditions lead to poor physical health.
For all its faults, a salaried job does offer stability. Just make sure that, before you take the job, you confirm that you’ll be a nonexempt employee and you get along with your new coworkers.
About the Author!
Sidd Pagidipati is the founder of Inventcorp and several other successful startups. In 2008, he was named Businessman of the Year by the Indo-US Chamber of Commerce. Before his career as an entrepreneur, Pagidipati worked as an investment banker for Merrill Lynch.