Paying Your Employee: Hourly Wage versus Salary Wage
GTM Payroll Services' Founder & CEO, Guy Maddalone, discusses "Paying Your Employee: Hourly Wage versus Salary Wage”
with GTM Household Client Service Representative and CPP, Evelyn Grassman.
GTM Payroll Services Inc.
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(Guy) Hi, I'm Guy Maddalone, CEO & Founder of GTM Payroll Services.
(Guy) Welcome to our Educational Video Series.
(Guy) Today's topic is "Paying Your Employee: An Hourly Wage versus A Salary Wage."
(Guy) With me is GTM Household Customer Service Representative and CPP, Evelyn Grassman.
(Guy) The first thing we're going to do is take a look at some of the definitions.
(Guy) An hourly employee is paid based on the actual hours they've worked in a given payroll cycle.
(Guy) On the other hand, a salary employee is paid based on an agreed annual salary amount, divided by the number of payroll cycles in a calendar year.
(Guy) Now Evelyn is going to talk about some of a payroll cycles.
(Evelyn) The most common payroll cycles we have are: Weekly, of course, giving you 52 cycles for the year; Weekly-Lag, which lags your payroll by one week, giving you 52 cycles goes in the year; Bi-Weekly, giving you 26 cycles in a year; Semi-Monthly gives you 24 cycles; and Monthly, of course, giving you 12 cycles per year.
(Evelyn) To compute your compensation, an hourly employee, you would multiply times their rate of $12.50 to come up with a $500 weekly rate.
(Evelyn) The salaried employee, you would take the $26,000 annual, in this case, take their compensation divided by 52 pay frequencies to come up with a $500 weekly salary.
(Evelyn) Hourly-paid employees allow for more accurate record keeping.
(Evelyn) Whereas, salaried employees are not typically tracked by hours.
(Evelyn) Compensation rules.
(Evelyn) Hourly employees: Under the Fair Labor Standards Act, requires an employer to keep a record of all hours an employee works.
(Evelyn) Whereas, salaried employees must be professionals.
(Evelyn) Who generally have sales, managerial or supervisory responsibilities.
(Guy) Thanks, Evelyn.
(Guy) Some of the best practices that we want to keep in mind is that, according to the FLSA and many State's Labor Standards, household employees are classified as non-exempt, and therefore must be paid on a hourly wage basis.
(Guy) Employers should always communicate in writing an hourly compensation to their employee.
(Guy) And employers should keep proper time cards.
(Guy) Employers should also document the hours worked on the employee's pay-stub each pay cycle.