Why Paying a Salary Is a Sensible Approach

Why Paying a Salary Is a Sensible Approach

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Employee compensation includes pay, money that is offered by hourly wage or through a salary. Many companies use both pay methods, providing hourly compensation for most workers and a fixed salary for managers and certain exempt employees. When given the option, paying a salary may just be the most sensible approach for your business to take.

Labor Considerations

By law, not every employee can receive a salary. Most jobs are governed by the Fair Labor Standards Act and the act’s rules about pay and overtime must be followed.

The FLSA categorizes jobs as exempt or nonexempt with the latter entitled to receiving overtime pay. Thus, if your company converts a nonexempt employee to a salary, overtime must still be paid for time worked above 40 hours per week.

Payroll Matters

Companies that operate a hybrid pay system of hourly and salaried workers have a more complex payroll to work with. With every worker paid a salary, those numbers are fixed and will not vary from pay period to pay period except for raises.

Salaried employees are not required to clock in or out, data that must be examined by your payroll department regularly. Employees earning an hourly wage will have their time cards reviewed, a payroll task that must carefully be carried out.

Work Hours

Employees that are paid a salary can work more than those that do not without any extra cost to the company. With overtime no longer a consideration, companies are able to pay workers the same whether they work 40 or 50 hours in one week.

Longer hours, of course, does not always correlate with increased productivity. For some positions, the lengthier work day leads to decreased productivity after a certain number of hours have been worked.

Worker Contentment

Your employees may prefer a salary for one important reason: job satisfaction. That satisfaction can be based on the employee knowing that their compensation is steady and reflects their job responsibilities. Typically, salaried employees are better paid than their hourly counterparts.

Salaried workers may sense loyalty to a company as the business rewards them for a job well done. Of course, if you require long hours and both the employee’s salary and perks do not reflect that commitment, then your approach should be revisited or you will risk losing your best workers.

Business Approach

With a fixed payroll, companies are better suited to plan and budget accordingly. Weekly variations are no longer a concern your payroll department can be freed up to handle other matters or your staff trimmed to a more manageable size.

Author Information

Bill Jackson is a professional blogger that shares advice on how to use laser cutting machines. He writes for Trotec Laser, which provides the best laser etching and cutting machines.

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Categories: Business Management

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