Does being on salary only benefit the employer?

Question

As a professional I am almost always a salaried employee. However, there doesn't seem to be any benefit to the employee for being on salary. For example, if I miss a day of work my pay is docked, but if I work 10 extra hours during the week I get no benefit at all since I'm exempt and the company doesn't have to pay overtime.

It seems to me that the point of being salaried is that you always get the same amount of pay regardless of time, but in practice this translates to "We don't have to pay you overtime, but you still have to work 8 hours a day".

For all intents and purposes it appears that the whole concept of salaried/exempt employees only benefits the company, who gets to ignore overtime laws, but has no apparent benefit to the employee, who has all the drawbacks of an hourly employee without getting any overtime or "time and a half" for working beyond the normal hours.

Is there any employee benefit to being Salaried or is it only good for the employer?

Answer 1

if I miss a day of work my pay is docked

This means you are really hourly. You should keep copies of all your timesheets/timecards and you may wish to examine your state's labor agency to get paid for missed overtime. Many companies are able to get away with this sort of behavior because they depend on their employees being ignorant of state and federal laws. Some enterprising lawyers are making large amounts of money with this sort of litigation, especially when adding RICO to FLSA

29 U.S.C. § 213 a(17) any employee who is a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker... {snip} and who, in the case of an employee who is compensated on an hourly basis, is compensated at a rate of not less than $27.63 an hour.

http://codes.lp.findlaw.com/uscode/29/8/213

I work 10 extra hours during the week I get no benefit at all since I'm exempt and the company doesn't have to pay overtime.

In the event that you are not going to file for back pay, a smart company would uses these timesheets to more accurately estimate the amount of effort it takes to get jobs done. If managers continue to estimate it takes 4 weeks to get a task done, and the people working on the task all work 20 hours of overtime each week, then it really takes 6 weeks to do the task - and future estimates should be adjusted accordingly.

Answer 2

It was always my impression that salary wages were always advertised higher (pay scale wise) than standard hourly wages (may not be the case I guess) for the fact that you may be occasionally called upon to do those extra bits of work.

In a good company I always liked salary as it gives me the impression to a certain degree that I have control over my hours and how I get my work done. I don't have to watch the clock and if I want to leave 15mins early or arrive 30mins late that would be ok. I will be making up the time somewhere. This kind of flexibility is something I really look for in a company. Of course it then requires me to ensure I don't abuse it and make sure I still do the work, but if I enjoy my job then that won't be a problem. Alternatively if I work an extra hour overtime, I should be confident enough to take an extra hour over lunch without having to worry about my time.

If you find yourself consistently doing extra hours then that to me raises a warning flag that something is not quite right in the work balance. Working extra hours shouldn't be the norm or expectation in a workplace.

In the end, if your company has a good "employee" focus and you manage your time well both personally and with your boss, being a salaried employee IMO can have equal benefits to both the employee and the company.

Answer 3

Being on a salary rather than an hourly wage does have it's benefits:

1. Potentially more flexibility over working hours.
2. Possible flexibility over duration and timing of lunch breaks.
3. Higher pay - this is the benefit you get for having to potentially work more hours or at weekends.
4. Time off in lieu for working weekends - this might not be available to a hourly paid employee who'd be getting overtime.
5. Possibly more holiday entitlement.

Obviously all of these depend on the employer and would be subject to negotiation. If you weren't offered at least one of these for the requirement to work extra hours then it might be time to consider a change of employer.

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Original answer, comparing employees to contractors:

It depends which country you are in but the benefits of being an employee (as opposed to a contractor) can include:

1. Paid holiday.
2. Paid sick leave - not always available immediately and not always at full rate, but certainly usual in the UK.
3. Pension contributions from the employer.
4. Training paid for by the employer.
5. Promotion to higher pay grades or even different roles (management etc.)

While you may be expected to work overtime for "free" you should also expect to get paid time off for medical appointments, and a certain degree of flexibility over lunchtimes and even start/finish times.

All of these will either be standard or subject to negotiation when you are offered a position.

Answer 4

While I agree that the whole "exempt from overtime" notion is of no benefit to employees, in the end, your work situation is still largely what you make it.

What I've done in this kind of situation (which is not exactly what your question is asking, but I'll go with it anyway), was just count my hours and make sure they added to a more or less normal work-week. If I did overtime, I'd do shorter time next week when I particularly wanted to leave early, or take a day off and not formally report it at all (i.e. email my team that I wouldn't be in because I wasn't feeling well or just because I worked all weekend and needed some rest, and didn't call/email HR to tell them I was taking a sickday) - with our work setup this resulted in my pay not being docked, but it may be different in your place.

Depending on how your work and your reporting is structured, this may not work without talking to your supervisor and asking for flexible hours first, so I would do that. If you're refused outright, you have a few options:
1) explain to them politely that if they won't be flexible, you won't be either, and they're not getting any more unpaid overtime work from you (see Mark Booth's comment on your question)
2) explain that, as per the link in Tangurena's answer, they're not treating you as an exempt employee at all: "To qualify as exempt, employees have to be paid a set amount each pay period, without any reductions based on the quantity or quality of work they do. If you dock their pay, you are treating them like nonexempt employees, and the law might classify them as such, which means they are entitled to overtime."
Still, in the end, if they're persistent about it, all you can do is either put up with it, quit, or sue them (which is probably more annoying that it's worth unless this is a particularly bad problem in your company).

Answer 5

Depends on your company. Sounds like your implementation of hourly vs. salary is one of the less desirable cases. In many cases, there's a really good reason to vary the ways you compensate people based upon the type of work that is needed. But the decision needs to be a fair trade both ways.

Hourly Conditions

For employees in a company, hourly really works best when the connection between productivity and time is very reliable. That usually includes cases like:

• Cases where pretty much anyone with the right skills can make X widgets per hour. Whether that's a very concrete thing like a meal or a pair of shoes, or a less physical result like running tests for a certain IT component or installing a server in a very rigid environment.

• Cases where being there for some number of hours and dealing with what comes is the majority of the work - retail, customer service, etc - it's not so much "servicing x customers" as answering needs as they arise. If person A isn't there, person B has to be, since we can't have a situation where business is open an no one is doing this. Granted, there's still cases of efficiency measurement - but the general thought is that if there was no need this hour, you'd still get paid just for being there.

This stuff fits well with overtime pay - companies will get a tangible benefit from the overtime, employees get compensated for providing that benefit.

It also implies that in most cases, work could be transferred somewhat easily. If Employee A can't work overtime this week, Employee B can and can relatively easily pick up the work that A would have done.

The Pros: - overtime pay when extra hours are requested - very clear on the job/off the job boundaries

The Cons: - not every job will guarantee a minimum. I know plenty of folks working hourly positions and not picking up enough hours to pay the rent. - Many truly hourly jobs are lower on the decision and higher on the formal procedures. The company wants to make sure that the connection between your time there and the value they receive for it are tightly linked. Expect more supervision and more specific rules. - usually linked to specific hours - even in a widget-per-hour job - the employer will likely have some scarce resources so that no everyone can be in at their own choosing. In the service industry, this is an absolute limit - people have to work standard hours and shifts to give the service in a reliable way during business hours. - income is very tightly tied to company value. If you are easilyi replaceable and highly regimented in the job, it's easier to avoid paying more by finding new employees.

Salary Conditions

Overwhelmingly, salary is best for a case where work can't easily be boiled down to such a simple equation that is linked to time. For managers, knowledge workers, and other high-decision jobs, the nature of your decision has a radical impact on both the sucess of the company and amount of overtime. In most salaried roles, employees are expected to work smart not hard - finding ways to improve efficiency be means that fit within the corporate rules and local legislation.

The employer should have chosen this method because they can't find a way to link your hours to their benefit. It's too non-deterministic. One week the employee will get tons of work done with no overtime, the next week a crisis will hit, and many hours of overtime will be required to maintain the status quo.

Pros: - Most salaried jobs imply a certain degree of authority and decision making. Note - not necessarily managerial authority - a software developer is owner of his code, a lawyer owns his client's projects, a doctor owns his patient's well being. - There's usually a more flexible give and take with how work is done what training options exist. In higher level positions, employees are expected to control their own training plans. - Some degree of schedule control - there may be core hours and other specifics, but usually how much overtime is required is somewhat within the employee's purview. If I care about a project deeply, I work extra, if I don't, I do the bare minimum to get the job done and over. It's rare to have truly obligatory overtime (come in and work late or be fired) - Guaranteed salary - more formality in hiring/firing

Cons: - Overtime happens. The party line is "presumably you've negotiated a high enough salary to compensate for that" - Your professional development is likely to be more unclear and more your responsibity

But what about contractors?

Especially in tech work, contractors make this rule trickier. They may do the same job as a salaried person - so why do they get to work hourly? Well.. it may be the same skill set but if the company is wise, it's usually that:

• Contractors are satisfying a temporary need - the work will go away in time, so hiring a long-term employee doesn't make sense - the company is paying extra to be able to change or discontinue the work.
• Contractors are providing skilled hard to find labor and not making decisions that impact the company deeply.
• Potential employees are working on a test basis as contractors.

Pros -

• usually more money - a higher take home salary as compensation for the temporary nature of the work
• less obligation to the company - employees are usually expected to take on work for the company's good that isn't strictly related to their job skills.

Cons -

• little to no training - the company will provide the bare minimum it can get away with
• can be terminated at any time with little warning
• more expectation to do what you are told, and not take initiative or be invested in the business

Answer 6

In some cases, it has Class implications if you are on a salary and fix your own hours of work. You are considered in a different social class than blue collar workers.

One of my colleagues in BT commented that if I did as much charitable community work as a friend I could end up getting a better honour than he would as “one of us” would not be given only a MBE.

Though not all “salaries” are no fixed hours it can be useful for example at year end. In BT there was a huge reconciliation process for our engineering centre which require a lot of OT and hassle. After it was all done the entire centre went down the pub for the afternoon.

Answer 7

To answer the poster's question. Yes, in the United States, salary pretty much only benefits the employer and poses little to no benefit for the worker other than guaranteed hours per week.

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1) "You have no sick, vacation or personal time off? That would be so rare in the US that I've never known of a job with such few benefits."

Both Exempt and Non-Exempt employees usually receive vacation and sick time.

For many of us, that is 2 weeks vacation, 3 sick days. One illness or surgery, and those sick days are quickly used up.

Furthermore, such policies cause many to work while sick, further causing others to be sick.

If you have to stay 2 hours overtime, you get no pay or compensation. If you have to take 2 hours off for doctor's appointment, you are forced to use your vacation time.

2) "It was always my impression that salary wages were always advertised higher (pay scale wise) than standard hourly wages"

That's often not the case. In fact, a W2 salaried employee often earns a substantially lower wage than a 1099 Contract employee who has to supply their own benefits.

The idea being you would get vacation and sick time, 401Ks and benefits. However, such have been reduced to 2 weeks + 3 sick days, zero matching contributions, and healthcare plans that have $2,500 deductible and $10K out of pocket limits.

We've essentially had about $5K-$10K deducted from our salaries over the past decade or so.

3) " I don't have to watch the clock and if I want to leave 15mins early or arrive 30mins late that would be ok."

While employers will expect you to stay late and finish a task, even if it interferes with your personal life. They are often upset and critical of any tardiness.

4) "In the end, if your company has a good "employee" focus"

Almost no big companies have this anymore.

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As for the below, pretty much NONE of those are accurate. And all of which are in fact often more true for hourly workers than salaried.

Being on a salary rather than an hourly wage does have it's benefits: 1.Potentially more flexibility over working hours. 2.Possible flexibility over duration and timing of lunch breaks. 3.Higher pay - this is the benefit you get for having to potentially work more hours or at weekends. 4.Time off in lieu for working weekends - this might not be available to a hourly paid employee who'd be getting overtime. 5.Possibly more holiday entitlement.