What is a Salaried Employee?
A salaried employee is someone who receives a fixed amount of compensation regardless of the number of hours worked. They usually work 40 hours a week and don’t qualify for overtime pay or minimum wage. Salaried employees receive the full amount they are promised per week or month.
Their payment is predetermined or negotiated at the time of joining. According to the FLSA (Fair Labor Standards Act), any employee who works as a professional, administrator, executive, etc., is exempt from overtime payment or minimum wage if they are paid by salary. Salaried employees, who are exempt, have an advantage over hourly employees as they receive a fixed pay regardless of the number of hours worked in a specific period. They are also qualified for extra compensation benefits along with paid time off.
Example of a Salaried Employee
For example, if a salaried employee is paid ₹7,00,00 annually, he will be paid that amount regardless of the number of hours worked by the employee in a year. This amount includes basic salary, benefits, deductions, PF, and other benefits/deductions. The ₹7,00,00 is divided into weekly, biweekly, or monthly payments depending on the type of company. Compared to hourly workers, salaried employees receive their payment on a less frequent basis.
Advantages of Salaried Employees
A salaried employee is entitled to various benefits and perks, though they are not qualified for overtime pay or minimum wages. The main advantage of salaried employees is that they have more opportunities to enhance their career and receive various benefits like paid time off, health plans, vacations, pensions, allowances, and many more. The advantages of salaried employees are:
1. Salary is predetermined and fixed
One of the main advantages of being a salaried employee is that the payment received is determined or negotiated at the time of joining the company. Employees receive compensation periodically, but less frequently than hourly employees. Hence, salaried positions give a sense of security to the employees. Hourly employees do not have a fixed wage but receive their payment on a more frequent basis.
2. Employee benefits and perks
Salaried employees are usually entitled to receive employment benefits like health care, paid time off, vacations, pensions, retirement benefits, etc. Hourly employees are not qualified for such benefits as they are ‘non-exempt’ and only receive overtime payment and minimum wages.
3. Higher compensation and employment status
Salaried employees usually have a higher employment status than hourly employees and have jobs that seem more professional. Higher job positions mean higher pay, which will increase employee morale and productivity. On the other hand, hourly workers have little to no opportunities to have an increase in their pay. Typically, they do not have a good employment status when compared to salaried employees.
4. Flexible work hours
Employees have the freedom to create their own work schedules to balance their life and work. They can move away from the traditional nine-to-five job and change the times they begin and end their workday. Hourly employees, on the other hand, do not have much work flexibility. They have fixed time schedules which cannot be altered out of their own free will.
5. Better career path
Most salaried employees work in a professional job role with high pay, which guarantees a great career path. Unlike hourly employees, they have more career advancement opportunities which may result in higher pay. They are free to explore other career paths or move ahead in a company or position better than the current one. Hourly workers have less career options to explore as their jobs generally require low skills and education while also working only for a short period of time. This decreases their chances of advancing to better positions within the company.
6. Authority, prestige, and responsibility
With a better career path and job comes more responsibilities and higher authority. Employees carry themselves with an air of professionalism which improves their prestige in society. They adhere to the code of conduct and are accountable for their duties because they are motivated to deliver what is expected of them.
Disadvantages of Salaried Employees
While salaried employees have work flexibility and receive various benefits and perks, they have a few disadvantages as well. Even if they have a fixed salary, it could also mean that the salaried employees are being paid the same even if they work more or extend their work hours. The main disadvantage of salaried employees is that they generally are not qualified to receive any payment for working extra hours or receive minimum wage. A few other disadvantages of salaried employees are:
1. No minimum salary or overtime payment
When compared with hourly workers, salaried employees are exempt from receiving any overtime payment. This means that even if they work beyond the scheduled work hours, they will not receive any extra payment. Hourly workers, on the other hand, are entitled to receive extra payment for the extra hours they have worked. They also have a set minimum wage per hour/week, unlike salaried employees.
2. Longer work hours
Even though salaried employees can schedule their own work hours, they are responsible to finish their tasks despite the number of hours they have already worked in a day. This can lead to extra work hours without any overtime payment. Sometimes, such extension of work hours can lead to little vacation time or paid time off.
3. Poor work-life balance
When salaried employees work longer hours, they may have to work late. In such cases, employees tend to prioritize their career and deal with additional responsibilities without fulfilling the demands of one’s personal life. This makes it difficult to find some personal time for oneself or for home. This is because salaried employees have more responsibilities, extra tasks, and less time for themselves.
4. Challenging to progress professionally
It’s difficult to make it to the top management positions, especially when salaried employees do not have the required experience. To make use of career advancement opportunities, the employees will have to devote their free time towards learning new skills, studying, or training. In most cases, it’s also challenging to progress professionally or get employment without having an adequate academic background.
5. High competition
There are many positions and jobs that are of high value because of the salary, education requirements, or the organization itself. Such positions are highly competitive. Only the highly skilled and qualified ones are selected, which makes it even more difficult for salaried employees without enough skills or proper education. But hourly jobs are easy to secure because they require low skills and education requirements.
Eliminate Month-End Chaos with Keka.
Overall, it is quite challenging for an organization to manage the payroll of salaried employees. Work can pile up until the end of the month for both the HR and finance departments to manually set salary structures, revise compensation plans, maintain compliance, release pay slips, avoid errors, and so on. Keka’s payroll software eliminates such tasks and facilitates easy payroll processing by:
- Managing leave, attendance, and overtime payments.
- Easy salary revisions and scheduled performance bonuses.
- Integrating with expense management software.
- Setting range-based salary structures and ensuring statutory compliance.
- Automating the payroll process and releasing of pay slips digitally.
- Consolidating the payroll data to generate useful analytics.
Frequently Asked Question (FAQs)
Q. What are the minimum hours of work for salaried employees?
The minimum work hours of salaried employees are 40 hours per week I.e., 8 hours per day. Some companies may extend the work hours to 9 or 10 hours, depending on the work or type of shift.
Q. What are the reasons when employers can cut salaries?
Employers can cut salaries of employees to avoid layoffs or save money. In other cases, it could also be due to demotion, misconduct, or poor performance. There could also be a reduction in benefits, vacation days, paid time off, and so on.
Q. Are salaried employees eligible for overtime pay?
According to the Fair Labor Standards Act (FLSA), salaried employees are not eligible for overtime pay. Any employee who is a professional and is paid by salary is not qualified for a minimum wage or overtime payment. They are, however, eligible for employment benefits and perks.
Q. How many hours does an employee need to work in a week?
An employee needs to work at least 40 hours per week, though this may vary depending on the type of work and organization. Most companies require employees to work 8 hours per day, for 5 days a week – Saturday and Sunday being non-working days.