{"id":281565,"date":"2025-05-28T07:50:13","date_gmt":"2025-05-28T07:50:13","guid":{"rendered":"https:\/\/www.aihr.com\/?post_type=hr-glossary&p=281565"},"modified":"2025-05-28T07:50:21","modified_gmt":"2025-05-28T07:50:21","slug":"hourly-employee","status":"publish","type":"hr-glossary","link":"https:\/\/www.aihr.com\/hr-glossary\/hourly-employee\/","title":{"rendered":"Hourly Employee"},"content":{"rendered":"\n

What is an hourly employee?<\/h2>\n\n\n\n

An hourly employee is a staff member who is compensated at a specific rate for every hour they work rather than receiving a fixed salary. This means their earnings are tied directly to the number of hours they clock in.<\/p>\n\n\n\n

Unlike most salaried employees, hourly workers are typically eligible for overtime pay when they work beyond the standard full-time hours defined by relevant labor laws and company policy. For HR, accurate tracking<\/a> of hourly employees is crucial for proper compensation and compliance with labor regulations.<\/p>\n\n\n\n

Hourly vs. salaried employee<\/h2>\n\n\n\n

The table below will help you understand the distinctions between hourly and salaried employees<\/a>:<\/p>\n\n\n

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\n\t\t\t\t\t\t\t\t\t\t\t\t\t \t\t\t\t\t\t\t\t\t\t\t <\/div>\n\t\t\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t\t\t\tHourly employee\t\t\t\t\t\t\t\t\t\t\t <\/div>\n\t\t\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t\t\t\tSalaried employee\t\t\t\t\t\t\t\t\t\t\t <\/div>\n\t\t\t\t\t\t\t\t\t <\/div>\n\t\t\t\t\t\t\t\t \n\t\t\t\t\t\t\t\t\t
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Compensation structure<\/strong><\/p> <\/div>\n

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Paid a specific rate for the hours they work.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Paid a fixed amount per pay period (e.g., biweekly<\/a> or monthly<\/a>).<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t

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Overtime eligibility<\/b><\/p> <\/div>\n

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Usually eligible (typically at 1.5 times their regular rate) for hours worked beyond 40 in a workweek.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Generally not eligible, but this depends on job duties and salary level (exempt<\/a> versus non-exempt<\/a>).<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t

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Tracking time\u00a0<\/strong><\/p> <\/div>\n

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Required to track and record all hours worked.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Typically not required. The focus is on completing tasks and responsibilities.<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t

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Schedule flexibility<\/strong><\/p> <\/div>\n

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The schedule may be more flexible, depending on the role and employer.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Fixed schedule to fulfill job duties (e.g., the same eight hours every weekday).<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t

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Pay consistency<\/strong><\/p> <\/div>\n

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Pay varies depending on the hours worked each week.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Receives consistent pay regardless of the actual hours worked.<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t

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Common roles\u00a0<\/strong><\/p> <\/div>\n

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Retail staff, customer service representatives, and manual laborers.<\/p> <\/div>\n \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Managers, executives, and professionals (e.g., accountants, engineers).<\/p> <\/div>\n <\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t \t\t <\/div>\n \t\t\t \t\t<\/div> \n\t<\/div>\n<\/div>\n<\/div>\n\n\n

\"The\n\t\t\t\n\t\t\t\t\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n

Do hourly employees get benefits?<\/h2>\n\n\n\n

<\/p>\n\n\n\n

Full-time hourly employees may receive comprehensive compensation packages<\/a>, including health, dental, and life insurance, paid time off<\/a> (PTO), retirement plans, and even performance bonuses<\/a>. The Internal Revenue Service (IRS)<\/a> defines full-time status for hourly employees as working an average of 30 hours per week, or 130 hours in a calendar month.<\/p>\n\n\n\n

Under the Affordable Care Act (ACA)<\/a>, employers with 50 or more full-time equivalent employees must offer them affordable health insurance, whether hourly or salaried. However, exceptions may exclude certain seasonal workers<\/a>. The IRS also doesn’t differentiate between hourly and salaried employees regarding benefit eligibility.<\/p>\n\n\n\n

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HR tip<\/strong><\/h4>\n\n\n\n

While hourly roles often provide the benefits or flexibility, you should strive to ensure your scheduling practices are as fair and predictable as possible. Unpredictable schedules can negatively impact employee morale<\/a> and retention. Avoid this by providing advance notice of schedule changes, and give your hourly employees a degree of control over their schedules.<\/p>\n<\/blockquote>\n\n\n\n

Do hourly employees get paid holidays?<\/h2>\n\n\n\n

Federal law in the US does not mandate paid holidays for hourly workers, and the Fair Labor Standards Act (FLSA)<\/a> stipulates that employers are not required to provide pay for time not worked, including holidays. However, certain exceptions apply to employees on government contracts<\/a>. <\/p>\n\n\n\n

While not legally mandated, union or collective bargaining agreements can secure paid holidays for hourly workers. In such cases, the terms of the agreement will dictate which holidays are paid, as well as any eligibility requirements. Additionally, employers may choose to offer paid holidays as part of their benefits package, even if it’s not legally required. <\/p>\n\n\n\n

Do hourly employees earn overtime?<\/h2>\n\n\n\n

Generally, hourly workers in the U.S. are entitled to overtime pay. The FLSA<\/a> mandates that non-exempt hourly employees qualify for time and a half<\/a> for any hour they work beyond the standard 40 hours per workweek.<\/p>\n\n\n\n

Additionally, remember that overtime laws can also be different from one state to another. For instance, California<\/a> not only requires time and a half for hourly workers who work over 40 hours a week or eight hours in a single day\u2014<\/span>it also requires double time (two times the hourly wage) for hourly workers who work over 12 hours in a single day.<\/p>\n\n\n\n

When managing hourly employees, especially in a business with a multi-regional or international footprint, it’s essential to comply with both federal and applicable local state overtime regulations to ensure legal compliance and fair compensation practices throughout your organization.<\/p>\n\n\n

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Learn to handle different compensation types skillfully<\/strong><\/h3>\n

Develop the necessary skills to handle different types of compensation for different employees \u2014 whether hourly, salaried, full- or part-time.<\/p>\n

AIHR\u2019s Compensation and Benefits Certificate Program<\/a> teaches you the various aspects of pay (e.g., base and variable pay), how to budget for salary cost, pay terminology, and how to motivate teams with effective and impactful pay structures.<\/p>\n

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GET STARTED<\/a><\/div>\n<\/div><\/div>\n \n\t<\/div>\n\t \n<\/div><\/div>\n\n\n

How to calculate hourly employee wages<\/h2>\n\n\n\n

To calculate wages for an hourly worker, use the following formula:<\/p>\n\n\n\n

Hourly employee wage<\/strong> = Hourly rate \u00d7 Total number of hours worked<\/p>\n\n\n\n

For example, if the employee\u2019s rate is $20 and they work 40 hours a week, their gross weekly wage would be:<\/p>\n\n\n\n

$20 hourly rate \u00d7 40 hours worked = $800<\/p>\n\n\n\n

If the same employee works an additional two overtime hours at time and a half in one week, their weekly pay would be calculated as follows:<\/p>\n\n\n\n

Hourly employee wage with overtime<\/strong> = Gross weekly wage + Overtime pay<\/p>\n\n\n\n

In this employee\u2019s case, their overtime pay<\/a> is:<\/p>\n\n\n\n

($20 hourly rate \u00d7 1.5) x 2 hours overtime = $60<\/strong><\/p>\n\n\n\n

As such, their hourly employee wage with overtime for one week is:<\/p>\n\n\n\n

$800 gross weekly wage + $60 overtime pay = $860<\/strong><\/p>\n\n\n\n

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HR tip<\/strong><\/h4>\n\n\n\n

Misclassification of hourly employees<\/a> can lead to significant legal and financial repercussions for your organization. Schedule periodic reviews of your workforce\u2019s job duties and responsibilities to ensure you\u2019ve accurately classified your team as either hourly (non-exempt) or salaried (exempt), in line with FLSA regulations.<\/p>\n<\/blockquote>\n\n\n\n

Hiring an hourly employee: Pros and cons<\/h2>\n\n\n\n

Below are some pros and cons of hiring hourly employees. Consider this when managing diverse staffing needs, workforce impact, and organizational costs.<\/p>\n\n\n\n

Pros<\/h3>\n\n\n\n