Is Hourly or Salary Better? Pros and Cons

The employer is only required to pay time and one-half overtime pay based on an employee’s regular rate of pay for all hours worked in excess of 40 in a workweek to its non-exempt employees. There is no limit on the number of hours the adult employee may be required to work. Please contract position vs full time note that the information contained herein is limited in scope and is only intended as an overview of the differences in reporting forms for independent contractors and employees. The information is based on current and active legislation, which may change in the future.

contract vs full-time salary

If Julio makes $17.50 per hour, his overtime rate would be $26.25 per hour. If he assumes that he’ll work 40 hours of overtime in a year, he would make an additional $1,050 for the year. If you agree to work for a $45,000 salary, you will earn a total of $45,000 by the end of a full work year.

Negotiating a job offer soon? I’ll help!

As the name suggests, part-time workers have fewer hours than a full-time employee. Part-time jobs typically require no more than 35 hours per week, and may be as few as 5-10 hours. Unlike full-time employees, part-time employees are not guaranteed the same number of hours or shifts each week. For example, a part-time cashier at a grocery store may only work 15 hours one week, and then 20 hours the following week. Part-time workers sometimes have the option of picking up additional shifts to cover for coworkers who call in sick, or for working extra hours during a particularly busy time of the year. However, you don’t have to pay for benefits or Social Security, Medicare, or unemployment taxes when you hire a contractor.

  • For example, a part-time employee at one business could work a morning shift every weekday, but a different business might have their part-time employees working longer hours on just a few days a week.
  • While salaried employees receive a fixed rate of pay, they also have specific responsibilities and tasks that must be met or completed—even if that means longer hours and occasional weekends.
  • If you run a business, you should consider offering health insurance to your full-time employees.
  • The only required rest breaks or meal breaks are for youths under 16 years of age.
  • Once work is over for the day, they can concentrate on family, hobbies, or a second job.

Review our guide to learn more about the salary vs. hourly definition and easy-to-read charts of the pros and cons of each. Several advantages and disadvantages of hourly and salary positions should be considered before making a career move. Workers and companies should carefully consider and discuss the above factors that differentiate the contractor vs. employee status so that both parties can make informed decisions. Employers can cut the hours of a nonexempt worker easily, but renegotiating a salary is more complicated. Because of the FLSA, you can’t negotiate whether a job is exempt or nonexempt. Regardless of job title, it’s the duties you perform that determine your job category.

Benefits of W-2s vs. 1099s: What’s the difference?

In 2018, 8.7% of U.S. sole proprietorship business expenses were spent on contractors, according to the IRS. It’s very important to make sure that you are classifying your workers correctly since misclassification can result in costly financial penalties and lawsuits (and no one wants unexpected costs!). Once you’ve decided whether the person is an employee or a contractor, make sure you document the factors that led you to that determination. If you are an independent contractor with questions about your status, contact the Department of Labor. As you expand your company to Poland, you’ll build teams of dedicated employees to help you carry out day-to-day business practices. If your company, still needs the expertise of contractors, G-P Contractor allows companies to hire anyone, anywhere.

For companies, this is one of the most significant differences in the cost of employees vs. contractors because they aren’t required to pay these expenses for independent workers. While independent contractors have flexibility in setting and adjusting their rates, employees often receive a fixed salary with the potential for a raise after a set period. Because of the significant difference in how independent contractors and employees are paid, workers and companies must negotiate a fair salary for this new working relationship. The most common benefits include health insurance, as well as dental, vision, and life insurance. Employers that offer insurance will usually pay for some (or even all!) of the monthly cost of the policy. Most full-time employees will also be eligible for paid time off (PTO) through federal holidays, vacation days, and sick days.