Is it better to be an hourly employee or salaried?


By web gangsta | Published:

It’s a question that nobody wants to ask their friends or neighbors, but it’s one that you ask yourself every day: how much money do you make in a year?

Do you feel that you are adequately compensated for your time spent working?

Minimum Wage, Maximum Damage How the Minimum Wage Law Destroys Jobs, Perpetuates Poverty, and Erodes Freedom
Minimum Wage, Maximum Damage
How the Minimum Wage Law Destroys Jobs,
Perpetuates Poverty, and Erodes Freedom

Generally speaking, it’s almost always better to be a salaried employee instead of an hourly worker.  The jobs, benefits, skills required are usually more demanding and fulfilling when you are no longer punching a clock.

But with all the recent talk about raising the minimum wage to $10 or $15 an hour, now it’s starting to get a bit more interesting when it comes to whether you should switch from being salaried to being hourly.

Let’s take a look at the math.  And yes, these are all pre-tax figures.

  • Someone earning $60,000 a year is supposedly making $30/hour if they’re working a standard 40-hour work week for 50 weeks a year (2000 hours).
  • But we know that in today’s world, working just 40 hours a week isn’t going to fly.  Chances are you’re working 50 hours a week easily.  Some ambitious souls may even be pumping through 60 hours per week.
  • 50 hours per week is 2500 hours over a 50-week span.   That equates to $24/hour.
  • If you’re able to survive 60 hours per week over the same 50 weeks, you’re only going to be earning $20 an hour.
  • If you were hourly and earning $24/hour for a 50 hour work week – that would be $960/week at regular rate and an additional $360 for the overtime (booked at 1.5 the usual going rate) for a total of $66,000 over 50 weeks.

In other words, you’re barely making more than that $15 minimum wage worker is by being driven to work those extra 15-20 hours a week more than you’re expected to.

BASICALLY – YOU’D BE BETTER OFF FINANCIALLY WORKING AT AN HOURLY RATE THAN BEING SALARIED.

And even if you end up making $100,000 a year, if you’re still working those same 50 hours per week you’re only going to be up to about $40/hour.

Does the math hold out here as well?  40 hours x $40/hour = $1,600 per week.  Add to that the additional 10 hours at time-and-a-half for an additional $600, making that a $2000/week take home pay.  Do this for 50 weeks and you get…. $100,000.  Work anything more than 50 hours a week, and you would be better off going hourly instead of being salaried.

  • For a 40-hour work week – $75,000 or $37.50/hour is the breakeven point.
  • For a 50-hour work week – $100,000 or $40/hour is the breakeven point.

What we’re getting at is that there’s a cost/benefit ratio at play here.  The more hours you work, the less valuable each of your hours becomes to you (and becomes less expensive to your company).

You need to maximize your value.  Don’t give your company anything more than you need to give them unless they’re paying you for your time and effort.

So consider switching to hourly – you may end up making more money that way.