Should You Pay Your Employees Day Rates Or Hourly Rates?The advantages of hourly pay and day rates

Hire rates will vary from industry to industry and how you pay an employee could determine whom you can attract to the role.

As an employer, or prospective business owner, before making any decisions it is essential to research the difference between day rates and hourly rates.

The following will explain the differences, outline the advantages and disadvantages, and propose some solutions to any difficulties that may arise.

The hourly rate

In simple terms, an hourly rate will mean that your employees will be paid for the number of hours that they work. In 2021, the average hourly pay for all UK employees was £13.57. Utilising such an hourly rate is extremely common, especially in the service industry.

Many employers favour the hourly rate over the day rate, however, although it has many benefits, it doesn’t come without its risks.

The benefits

With an hourly rate, everyone knows where they stand. It is a rate that comes with clarity and allows employees to know exactly what they’ll receive for the hours they’ve worked.

As hourly employees can be employed part-time, their presence can fluctuate in line with the amount of work available. Therefore, utilising hourly rates can also save you money in the long run.

The disadvantages

You may need to keep an eye on your employee’s time management in cases of overtime to ensure that it isn’t being mismanaged. Additionally, as a result of unprecedented overtime, costs can also be difficult to track and can sometimes spiral out of control.

It can also become complex when adjusting rates for various staff members of differing ages or their shift’s time of day.

Fortunately, with Findmyshift, rules can be applied, and payable hours automatically adjusted to calculate different hourly rates for specific staff members. This solution will ease many of the complications that arise with hourly rates.

Provided you stick to a time schedule and keep on top of your finances, an hourly rate will provide transparency between you and your employee, even benefit both parties and, in turn, benefit your business as well.

The day rate

Implementing a day rate will mean that your employees are paid a fixed amount for each set day that they work. The most common day rates use a calculation method of dividing a staff member's annual salary by 260 days (a 5-day working week), or 365 days.

Although many people across the world tend to be employed on an hourly rate—a whopping 59% of Americans—the day rate does have its benefits.

The benefits

Many employees find that operating on a daily rate provides a sense of comfort and security as they can guarantee what they will be paid at the end of a working day—even if they were to finish their tasks quicker than expected.

From an employer’s point of view, calculation and budgeting are considerably easier. A day rate will allow you to keep a grip on your finances, whilst also bestowing your employees with more freedom.

If they need to work extra one day, they can get those hours back another day with an early finish.

The disadvantages

In order to protect your employees from overworking or being taken advantage of, it is advisable to set a maximum number of hours that they are contracted to work. This will set a clear barrier between their day rate and their overtime rate.

If staff are to work short shifts, utilising a day rate can become complex as you’ll need to keep track of whom owes who what hours.

Fortunately, with Findmyshift, you are able to set a minimum number of hours required for the day rate to be payable. Where a staff member doesn’t meet their minimum hours, they will automatically be paid at an hourly rate instead.

The bottom line

As there is no black and white answer and various employees and employers may have their own preference, you may even be able to switch between methods with smart shift technology such as Findmyshift. This will allow you to find what’s right for your business and experiment whilst still maintaining control over your finances.

Alas, there is no right answer when it comes to choosing whether to pay your employees a day rate or an hourly rate. However, once you have conducted your research and considered the best practices for your industry, you will be able to make an educated decision that’s best for your business.




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