What's the difference between salary and hourly pay?

The core difference between salary and hourly pay is in how employees earn their wages, with salary workers receiving a fixed annual amount, and hourly workers paid per hour worked.

But the differences — and the consequences — go deeper than that. The structure of your compensation impacts taxes, benefits, job security, and even workforce dynamics, and getting it wrong can lead to compliance headaches and financial inefficiencies.

In this article, we’ll deep dive into salary vs hourly pay, explore the growth of the hourly vs. salary workforce in the US, and help your business understand which approach is right for you.

Salary vs hourly pay: The core differences

As mentioned, the fundamental difference between salary and hourly pay lies in how your employees earn their wages, how their work hours are tracked — and whether or not they’re entitled to overtime.

• Salary: Salaried employees receive a fixed annual amount, typically divided into biweekly or monthly paychecks, regardless of the number of hours worked. Importantly, they are often classified as exempt under labor laws, meaning they do not qualify for overtime pay.

• Hourly: Hourly employees are paid per hour worked and are usually classified as non-exempt. This means that, under the Fair Labor Standards Act (FLSA), they are entitled to overtime pay if they work more than 40 hours per week.

Who typically receives a salary?

Salaried positions are common in professional, managerial, and technical fields, where employees are expected to contribute beyond a fixed number of hours. These jobs often come with benefits such as health insurance, paid time off, and retirement plans.

Typical salaried professions include:

• Corporate roles (e.g., marketing managers, finance analysts, and HR specialists)

• Technology and engineering positions (e.g., software developers and data scientists)

• Professional services (e.g., lawyers, consultants, and accountants)

Who typically receives hourly pay?

Hourly pay is more common in industries where work schedules fluctuate, or where employees are hired based on demand. Hourly workers often have greater flexibility but may not always receive the same level of benefits as salaried employees.

Typical hourly jobs include:

• Retail and hospitality (e.g., sales associates, baristas, and hotel staff)

• Food service (e.g., restaurant servers, chefs, and bartenders)

• Healthcare support roles (e.g., nursing assistants, and medical technicians)

• Construction and skilled trades (e.g., electricians, plumbers, and carpenters)

• Manufacturing and logistics (e.g., warehouse workers and delivery drivers)

While many hourly workers are in blue-collar or service industries, some professional roles also offer hourly pay, such as contract-based IT work, consulting, or freelancing.

Legal and compliance considerations

When considering how to structure your pay, another important thing to consider is compliance. You must adhere to both federal and state labor laws to avoid legal risks such as unpaid overtime and wage disputes.

As mentioned, the FLSA sets regulations on minimum wage, overtime pay, and employee classification, with employees generally falling into one of two categories:

• Exempt employees. These workers are typically salaried, and are not entitled to overtime pay. To be classed as exempt, they must meet specific criteria, including earning a minimum salary (currently $684 per week in most states) and performing executive, administrative, or professional duties.

• Non-exempt employees. These workers are typically hourly and must be paid overtime (1.5x their regular hourly rate in most states) for any hours worked beyond 40 per week.

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However, these definitions can vary in some states. Other state-level variables include:

• Minimum wage. The federal minimum wage is currently $7.25 per hour, but many states have far higher minimum wages. These can also vary between cities and counties, as well as in certain industries. You must comply with the highest applicable rate.

• Overtime laws. Overtime rules are the same for most hourly workers, but in some states, salaried employees earning below a certain threshold may also qualify.

• Labor laws. Labor laws can also vary by state. For example, California mandates meal and rest breaks for hourly employees, while New York requires specific wage notices.

• Benefits and leave. Traditionally, only salaried employees have received benefits such as health insurance, retirement plans, and paid leave, with hourly employees not entitled to the same perks. However, many states have introduced mandatory paid sick leave laws that apply to both salaried and hourly workers.

To stay compliant and avoid legal issues, your business should:

• Stay updated on federal, state, and local wage laws to avoid underpayment risks.

• Implement clear payroll policies to ensure accurate tracking of work hours and overtime.

• Consult with legal or HR experts to ensure compliance, especially when hiring across multiple regions.

Alternatively, you can work with a trusted payroll partner like Remote, and let us handle all of this for you. We ensure that you are fully compliant with all federal, state, and local laws, and that the payroll process is accurate and painless each cycle. Learn more.

Hourly vs salary workforce growth trends

Over the past decade, there has been a shift in the composition of hourly and salaried workers. Hourly jobs have seen steady growth, particularly in industries that rely on flexibility and fluctuating labor needs, due mainly to:

• The gig economy boom. Platforms like Uber, DoorDash, and TaskRabbit have popularized flexible, hourly-based work, attracting millions of workers who prefer contract-based or on-demand jobs.

• eCommerce and logistics expansion. Companies like Amazon and FedEx have fueled demand for warehouse workers, drivers, and fulfillment center employees, most of whom are paid hourly.

• Legislative changes. Rising minimum wages in several US states and increased enforcement of overtime laws have made hourly employment more attractive for certain job seekers.

• Post-pandemic labor market shifts. Many workers in retail, hospitality, and healthcare who lost salaried jobs during the COVID-19 pandemic have transitioned to hourly roles, either by choice or necessity.

In fact, according to the US Bureau of Labor Statistics (BLS), hourly workers made up around 59% of the US workforce in 2024, up from around 56% in 2023.

However, while hourly roles are expanding, salaried positions remain dominant in professional, technical, and leadership roles. In tech and remote work particularly, many businesses offer salaried positions with flexible work arrangements to attract and retain top talent, particularly in fields like software development, data science, and digital marketing.

For employers, understanding these trends is crucial when designing compensation structures. If your company requires scalability and flexibility, you may lean toward hourly or contract-based hiring; if you’re seeking long-term talent retention, you may want to prioritize salaried roles with competitive benefits.

How Remote can help

Choosing between salary and hourly pay depends on multiple factors, and can affect your business finances, employee satisfaction, and legal compliance.

Whatever you choose, it’s important to ensure that all hours are tracked and paid out accurately, and that you are adhering to all employment and payroll tax laws from the local level up.

Remote handles all of this for you, even when these laws change, giving you peace of mind and allowing you to focus your resources elsewhere. To learn more about how we can help, speak to one of our friendly experts today.

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