What is an Hourly Employee?

By Clark K. — Published March 14, 2018

What is an Hourly Employee?

An hourly employee refers to a person who is paid for the number of hours he or she works, unlike a salaried employee who is paid a fixed amount that does not take into account the number of hours the employee has worked. Hourly employees are required to be paid a minimum wage. The amount set as minimum wage varies from state to state and an employer cannot pay the employee any less than that.

Minimum wages and overtime pay
Often, there is a federal minimum wage that is imposed by the federal government and a state minimum wage that is set by the state. An employer is required to pay the higher of the two.
In certain states, local governments have also set minimum wages that are far higher than either the state or federal minimum wages. In 2017, laws were passed against this system.

According to the law, an hourly employee is paid for a standard number of hours they work on a weekly basis. As per the federal law, it totals up to forty hours a week. If an hourly employee works for more than forty hours a week, it is considered to be overtime and he or she is eligible for extra pay. State laws regulate the payments for overtime although employers can be generous with the pay if they so wish.

In most cases, salaried employees are not eligible for overtime pay, although, in some cases, even salaried employees receive a consideration. This happens when the average weekly pay earned by a salaried employee is much less than the amount that is set by the Department of Labor.

Unlike salaried employees, hourly employees do not work on a contractual basis. They can be hired or terminated at any time with no consequences for the employer.

Number of hours worked and benefits
Hourly employees are required to record the number of hours they work through a simple system that either uses a time card or a time sheet. The wages are handed out based on the number of hours that have been recorded by the system.

Hourly employees are different from part-time employees. The two terms are often mistakenly thought to be one and the same. Part-time employees, like salaried employees, have fixed working hours and pay. Some of them are entitled to certain benefits as well. The payment received by a part-time employee is quite different from the payment received by hourly employees.

In most cases, hourly employees are those who work in entry-level jobs or even manual labor. Examples of hourly employees include waiters at restaurants, ancillary staff, house help, and so on.

In certain cases, hourly employees are entitled to certain benefits such as paid sick leaves and holiday exemptions. This depends strictly on company policies. An hourly employee who works in a company becomes eligible for the benefits that a full-time employee is entitled if the total number of hours worked is more than what is normally put in by a salaried employee. Federal laws dictate that an hourly employee who works at least 130 hours on a monthly basis are entitled to such benefits.

Hourly employees contribute a large fraction of the country's workforce and their labor is invaluable. But, often, hourly employees are taken advantage of and a number of such employees are not paid in full or on time. As a result, the people in this segment become demotivated and unwilling to take up work. It is important to motivate hourly employees and make sure that they receive the benefits they are entitled to. They contribute in a large way to everyday labor and they are an important part of the country's workforce.

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