Hourly Or Salary? A High-Level Overview
When hiring people for your business, one of the biggest questions a business owner may have is if they should pay either hourly or have them on salary.
I am writing this blog to help you decide which is best for your business and your employees.
What’s the Similarity?
Well, here in Canada…
You’re still required to pay overtime unless they are a manager or in a management position.
You still have to pay benefits (if you have a benefits package to offer).
You still have to pay out vacation one way or another.
You probably want to keep track of salaried workers’ hours to make sure you’re not overworking them and ensuring you’re paying them properly.
Both bring invaluable experience to your business and choose to work with you.
What’s the Difference?
The difference between hourly pay versus salary is relatively straightforward. Salary is a fixed term kind of payment whereas hourly is more irregular and solely based on the hours worked.
Employees who are paid hourly might have a more irregular schedule, may work in industries that are typically paid by the hour (such as restaurants, nursing, and even some office-based work).
Salaried employees typically work more predictable hours (the old 9 am-5 pm stereotype!), but like hourly employees, could receive bonuses, per diems, and overtime (depending on their role).
What You Should Know About Hourly Employees
A few things you should consider about hourly employees are:
You have more flexibility in setting their hours based on what you and your business need.
If you have a benefits package, you’ll have to make sure that your hourly employees work enough hours on average to stay on the plan.
If they work over 40 hours in one week or 8 hours in a day they are paid overtime. If they work more than 12 hours a day, they are paid double overtime.
Please note: This information and the amount of overtime varies by province, so make sure you do your research and know your province's rules on overtime.
You have to keep track of their hours. A good way to keep track of hours (or any other of your accounting work) is online. Check out this blog if you want some more information on that! A tool I often promote is Wagepoint and its tracking tool. I have also used Toggl as a free alternative.
What You Should Know about Salaried Employees
A few things you should consider about salaried employees are:
It’s much easier to keep track of benefits.
Your payroll will be easier to process because there are no fluctuating hours to keep track of.
It’s far easier to budget
Someone on salary can still have flexibility in their schedule and do not have to work your typical 9-5, 40 hours a week. Again, you and your employee can decide what’s best.
What Should You Choose
Here at Signal Operations, I have a progressive approach to wages, employees, and hiring. You have to decide what’s best for your business, what’s best for your employees, and find a good compromise.
Creating a compensation plan and package isn’t an easy task, but you’ll find me firmly on the living wage side of the discussion and adding perks from there. For example, my employee’s hours greatly vary depending on if we’re working on month-end or not, so she’s on an hourly wage (for now). A future employee might be more consistent, so it’s easier for me to put them on salary with job expectations, general hours they should work, and so on.
In Canada, we’re required to pay a minimum wage to our employees, so regardless of their wage status, be sure to check your local provincial guidelines. Nearly every province requires a minimum of 4% Vacation Pay, whether that’s paid vacation (two weeks off) or 4% paid out every paycheque.
So, to answer the question - should I pay hourly or salary? Consider what is best for your business, best for your employee, a living wage, hours, etc. You’ll have all the legal requirements for both types.
If you need some more help figuring this all out or need any other bookkeeping/accounting help, book a discovery call.