What Happens When an Employee Is Asked to Move From Hourly to Salary?

Breaking down the key issues an employee must consider

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In organizations where hourly and salary employees are employed, you might view a move from an hourly or nonexempt position to a salary or exempt position as a promotion. But is such a move right for you?

More often than not, the answer to this question is yes. But if you receive or seek an hourly to salary position, it's important to analyze the positives and potential negatives.

Key Takeaways

  • Though many consider the move from hourly to salary a promotion, this is not always the case.
  • Some benefits of remaining an hourly worker include higher take-home pay, less-demanding work duties, and more flexibility.
  • Salaried employees receive perks like health insurance, 401(k) contributions, and more PTO but in turn are delegated more responsibilities.
  • Salaried employees may be asked to perform work after-hours without receiving overtime pay.

The Pros and Cons of Transitioning From Hourly to Salary

 Salary Hourly 
 Not eligible for overtime  Not eligible for overtime
 Access to better benefits like health insurance and retirement No access to employer-sponsored health insurance and retirement benefits
 Managers may have higher expectations and delegate more responsibilities Less responsibilities 
 May offer additional perks like company discounts, free lunches, and more May offer more flexible work schedule and ability to work remotely
Eligible for bonuses and additional compensation Typically not eligible for bonuses or company-wide raises

Overtime and Wages

One important factor to consider is that salaried employees aren't eligible for overtime pay as defined by the Fair Labor Standards Act (FLSA). So if you're an hourly employee who is moving to a salaried position, it's important to consider how this factor may impact your paycheck.

It may sound counterintuitive, but you may actually take a pay cut when moving from an hourly to a salaried position. This is because contract workers are typically paid a higher hourly wage in order to make up for the lack of security and health insurance and retirement benefits.

If you can't afford a drop in your monthly income, and you receive health insurance through your spouse or some other entity, it might be a good idea to decline the promotion.

Benefit Package

That being said, it's likely the total compensation for the salaried role is similar to or higher than what you made as an hourly worker. You should factor in your employer-sponsored health insurance and company match to your 401(k) when comparing your wages.

Salary jobs also have access to additional perks that hourly employees do not have. These include more flexible schedules, leaving for the doctor and other appointments without losing pay, and company-wide perks like discounts to gyms, commuter benefits, and free lunches or snacks.

Additional Responsiblities

In an employee participative, empowering work environment, the lines between salaried and hourly functions blur with respect to responsibilities. But, an hourly employee moving to a salaried job most frequently takes on the responsibility for the department they may formerly have just worked in.

Or, they take on the new responsibility of managing people who many times are their former coworkers.

In another scenario, the hourly employee moves into a salaried role that requires decision-making and autonomous actions. An individual who is used to a job in which most actions are predefined by a supervisor may struggle with the responsibility of the new role—or they may revel in it.

Whatever the comfort level, the employee who moves from an hourly to a salaried role will spend time adjusting to the new expectations. But many thousands of employees have successfully made the transition. 

Different Expectations of Hourly and Salaried Employees

Organizations have different expectations of salaried employees. Hourly employees are paid hourly to produce a product or perform a task. Salaried employees have broader job descriptions that involve goals and outcomes that are less measurable than the goals for hourly employees.

The hourly employee is paid for each hour worked with overtime and sometimes even double time on holidays. The salaried employee is expected to work the hours necessary to complete the whole job, no matter how many hours achieving the goals entails.

Certain differences exist because of the nature of the work, too. An hourly employee is finished with work when he or she goes home. It's actually illegal for an hourly employee to work off the clock without pay, so employers must prohibit this.

The salaried employee is expected to think about the job off the clock. If you're a salaried employee, you may be expected to think about your job or perform tasks in the evenings and weekends. Salaried employees are almost never off the clock and their compensation is based on getting the whole job done.

Non-Financial Considerations in an Hourly to Salary Promotion

People don't often talk about the nonfinancial aspects of moving from hourly to salaried employment, but they are substantial. In the average workplace, salaried or exempt employees get more respect than their hourly counterparts.

They expect a certain amount of esteem that is attached to a salaried job. Employees are insulted if asked to move from a salaried job to an hourly job. It is a blow to their esteem and self-worth.

Salaried employees experience more freedom and autonomy than the average hourly employee. They receive less direction and management and they are empowered to complete their whole job. They come and go as necessary to complete their job and this includes lunch and breaks as they desire. For the most part, they are also the bosses, supervisors, managers and senior staff in their organizations.

Hourly employees who often work in jobs that require staffing at all times do not experience this kind of freedom. For example, on an assembly line, breaks and lunch must be planned and covered by another employee.

So, employees considering a move from hourly to salary employment might also want to consider the non-monetary benefits of such a career-enhancing move.

Frequently Asked Questions (FAQs)

Is it better to be a salary or hourly worker?

There are perks and challenges to being both an hourly and salaried worker. Generally, a salaried employee enjoys more benefits like employer-sponsored health insurance, retirement benefits, eligibility for annual or semi-annual bonuses, and other company-wide perks like gym discounts, commuter benefits, and free lunches or snacks. However, salary employees typically have more responsibilities. On the other hand, an hourly worker may receive higher take-home pay to compensate for the lack of benefits and job security.

Do salary employees get overtime?

No. Unlike hourly workers, salaried employees are not eligible for overtime. However, many salaried employees' contracts contain clauses noting their eligibility for annual bonuses or raises.

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