Which is the better option for your business?
Many companies rely on the work and commitment of their salaried employees. However, the inflexibility of these types of employees can have some negative aspects.
We explore the pros and cons of salaried employees below so that you can make a decision on whether salaried employees would be best for your business.
What is a salaried employee?
A salaried employee is an employee who receives a fixed amount payable at certain times, that may be weekly, bi-weekly or monthly. Salaried employees generally work full-time and will follow a fixed working pattern.
A non-salaried employee receives an hourly or daily rate, or a 'wage', as many would refer to it in the UK. Non-salaried employees will typically have a flexible working pattern and won’t work the same shifts week on week.
The main difference between these two types of employees is that a salary is an agreed-upon amount between the employer and the employee. Whereas a wage will vary upon the hours worked and performance of the employee.
A salaried employee will receive the same amount, regardless of the hours worked. But a non-salaried employee will be paid an amount directly correlated to the hours or days worked.
Non-salaried employees are also eligible to be paid overtime if they work over a certain amount of agreed-upon hours; this would be set out in the employee’s contract.
Pros of salaried employees
Salaried employees don’t typically receive overtime pay
As mentioned above, most salaried employees receive a fixed amount, no matter how many hours they work. You can save a lot of money as a business owner not having to fork out premium overtime pay for your workers.
Salaried workers are expected to deliver their work, as set out by their employer, no matter how many hours they need to work to complete it.
Even just the admin work alone of having to track hours worked, and calculate overtime pay can be expensive and time-consuming.
Payroll is simpler with salaried employees
Following on from the above point is the fact that it’s much simpler for your payroll department to keep track of salaried employees.
With salaried employees, you don’t need to keep on top of people changing or swapping their shifts last minute, or making sure that employees have clocked in or out on time. Though of course, solutions like Findmyshift can make that easy anyway.
Flexibility around working hours
It’s much easier for salaried employees to work flexibly. This is especially handy for your employees when arranging doctor’s appointments, childcare and having to deal with emergencies that pop up.
It means they can make up their hours another day, and you don’t have to worry about finding cover for them.
Drawbacks of salaried employees
Salaried employees may work less than agreed hours
With salaried employees, it’s harder to keep up with the hours they are working, especially nowadays when working from home is more common.
Although an hour here and there may not seem like a massive loss, this added up over time can have a real impact on productivity and really affect your bottom line.
Making it clear to employees that they must be working during certain hours of the day, or at least be available during these hours, is a good way to avoid this.
Performance is harder to track
Following on from the previous point, it’s also difficult to gauge the performance of salaried employees, which can make things like performance reviews difficult to prepare for.
You may end up with salaried employees doing the bare minimum required of them, as they know that they will be paid the same regardless.
So, we believe it’s a good idea to make sure that you keep on top of the work your salaried employees deliver throughout the workweek so that it’s easier for you to track performance (and be aware of anyone not picking up the slack).
Salaried employees expect better benefits
Many salaried employees expect certain benefits as well as their salary. It’s a good way of attracting high performing team members, but be careful of spending too much on these perks.
Some employees in the UK are even offering free holidays and the use of luxury Italian villas.
While it’s good to provide incentives for your employees to keep them motivated, they can quickly build up and affect your bottom line.
While there are many benefits to having salaried employees, there are a few things that are important for you to consider before building your whole business around this one type of employee.
Make sure that communication is always clear so that you and your employees know what to expect from one another.