A Downside to Hourly Pay?

By Lily Garcia
Special to washingtonpost.com
Thursday, July 5, 2007 9:26 AM

I recently found out that my employer has been inadvertently paying me by the hour rather than paying me a salary. Does this affect me negatively in the long term?

Many people regard being paid a salary as carrying some sort of cachet that an hourly wage does not, but that is wrongheaded. What lies behind this perception (and, I suspect, your question) is the mistaken belief that being paid by the hour somehow indicates that your job is menial. No matter what you do for a living, you can express your earnings in hourly, monthly, or yearly terms. How your employer chooses to pay you is similarly a question of mathematical expression rather than a value judgment.

You also may be wondering whether being paid on an hourly basis means that you become entitled to overtime for hours worked in excess of your regular schedule. That is not so. According to the Fair Labor Standards Act (FLSA), the federal law governing overtime, it depends upon your day-to-day job functions, not the way you are paid.

In other words, it is entirely possible to be paid on a salary basis and be entitled to overtime, just as it is possible to be paid on an hourly basis and not be entitled to overtime.

Most employers do pay their overtime-eligible ("non-exempt" under FLSA) employees on an hourly basis, perhaps because it makes the time-and-a-half pay calculation simpler. This has helped perpetuate the common misconception that being paid by the hour equals overtime eligibility.

If you suspect for some reason that your employer has misclassified you as ineligible for overtime ("exempt"), that is another matter. The regulations in this area are complex, but a good place to start is the Department of Labor's Office of Compliance Assistance Policy, which offers extensive online guidance at http://www.dol.gov/compliance/.

Lily Garcia has offered employment law and human resources advice to companies of all sizes for 10 years. To submit a question, e-mail lilymgarcia@gmail.com. We reserve the right to edit submitted questions for length and clarity and cannot guarantee that all questions will be answered.

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