Starting your own business or taking over an existing business can be a huge task. You may be prepared professionally, but there are still many details and tasks to master. Among the most challenging tasks is defining new roles in the workforce when this is necessary. Whether you are building or expanding a team, it’s important to make industry-aligned decisions to ensure that your roles are well-balanced. Including how you choose to pay each role as hourly, salaried, and/or exempt.
Any time you are creating new roles, it’s important to determine whether employees will be salaried or hourly. This tells you not just what you will be paying your employees, but how you will be paying them. Pay hourly employees for the time they work under fair labor laws. Salaried employees gain a more reliable paycheck that is linked to the days and weeks they work. There are also implications for a role from whether you choose hourly or salaried.
But which should you choose for each of the new roles you are creating? This article is here to help you make the right decision.
Deciding Role by Role
It is impossible to make a blanket judgment about pay style because each role must be paid based on the expectations of the role. Start by listing each role and then define the tasks and schedule for these employees. This will guide your decision making as we cover the other important considerations.
Understanding Salaried vs. Hourly Job Expectations
The biggest difference between salaried and hourly pay is how you expect each role to handle their hours.
Hourly
Hourly workers arrive and leave exactly when you tell them to. You define the days, times, and hours they work and are responsible for paying them precisely for those hours down to the minute. This means that if you’re not sure when you’ll need these staff or if their number of hours vary throughout the year or weekly schedule, then hourly is often the better answer.
Salaried
Expect salaried workers to handle their own hours. While you may assign a shift, their pay stays the same as long as they work 40 hours or less. Salaried workers often come in early or late to complete a job and their hours stay about the same. Salaried workers are also more likely to be managers, technicians, and other roles who come in every day and are judged on project completion rather than individual task completion.
Exempt
Exempt employees are almost always salaried and are exempt specifically from the FLSA overtime standards. They are exempt from overtime because their role requires them to put in whatever time is necessary. An exempt employee is not paid overtime if they stay late for a few weeks finishing a project. But neither are docked pay if they leave early because their efficiency has finished tasks quickly. A role must be qualified as exempt before any overtime exemptions can be made.
What Is Standard for Each Role in Your Industry?
Once you understand the basic differences between hourly, salaried, and exempt employees, your best tool is to look at the labor market data for your industry. Industry-standard pay for each role, or type of role, is the ideal way to model any new roles you are creating.
Look at other businesses in your industry or follow your business model for the same role title. This is a great guideline for where to start and it will also tell you what employees will expect when they apply for the job.
In most businesses, you will be able to draw some kind of parallel. If you invented new, custom roles, then find comparative roles in your industry that hold similar pay expectations. Contact us to learn more.
