As a small business owner, one of the most important decisions you’ll make is who to hire. One option is to hire salaried employees. While this can be a great choice in many cases, there are also some potential downsides to consider. In this blog post, we’ll explore the advantages and disadvantages of hiring salaried employees for small business owners.
The Difference between Salaried Employees and Hourly Workers
Salaried employees and hourly workers are two different types of employees with distinct pay structures. Salaried employees are typically paid a fixed salary regardless of the number of hours they work. Hourly workers are paid an hourly rate for each hour worked. Salaried employees often have more flexibility in their schedules and are expected to take on a higher workload, while hourly workers are typically paid overtime for working more than a certain number of hours per week. Workers that are on a salary may also be eligible for benefits such as healthcare, retirement contributions, and paid time off, while hourly workers may not be eligible for these benefits depending on their employment status.
Some businesses opt to have all hourly workers, or all salaried workers. Others opt to have a mix of both to manage fluctuating demand. Salaried employees would be the baseline workers, working full time. Hourly workers would then fill in the gaps where needed, maybe only working part time hours. This give businesses the stability of a core workforce, without having to pay all of their workers for full time hours. According to recent Labor Department Data, 82.3 million workers ages 16+ were paid at hourly rates. That makes up 58.1% of all workers in the US. The other 41.9% makes up the rest of the salaried workforce. So, let’s look at the reasons you might want to hire salaried employees!
Advantages of Hiring Salaried Employees for Small Business Owners
Consistent Payroll Expenses
One of the primary advantages of hiring salaried employees is that you can offer them a consistent paycheck. This can be beneficial for both you and your employees. For employees, they know exactly what to expect in terms of their pay and can budget accordingly. For you, it can help with budgeting and forecasting expenses.
Salaried employees often have a stronger sense of loyalty to their employer than hourly employees. This is because they are more invested in the success of the company, as their pay is not directly tied to the number of hours they work. This can lead to a more committed workforce and increased productivity.
Salaried employees often have more flexibility in their schedules than hourly employees. This can be beneficial for both you and your employees. For employees, they have more control over their work-life balance, which can lead to increased job satisfaction. For you, it can mean having employees who are more willing to work overtime or take on additional responsibilities when needed.
Salaried employees often have a higher level of expertise and experience than hourly employees. This can be beneficial for your business, as it means you have employees who are more knowledgeable and capable of handling complex tasks. It can also be beneficial for your employees, as they have the opportunity to learn from experienced colleagues and grow their own skills.
Disadvantages of Hiring Salaried Employees for Small Business Owners
One of the primary disadvantages of hiring salaried employees is that it can be more expensive than hiring hourly employees. Salaried employees are typically paid more than hourly workers, and you may also be responsible for additional benefits such as healthcare, retirement contributions, and paid time off.
Lack of Flexibility
While salaried employees may have more flexibility in their schedules than hourly employees, they may also be expected to work longer hours or be available outside of normal business hours. This can be a disadvantage for employees who value their work-life balance, and can also create additional stress and burnout.
Difficulty Managing Workload
Salaried employees are often expected to take on a higher workload than hourly employees. This can be challenging for small business owners who may not have the resources to hire additional staff if an employee becomes overwhelmed. It can also lead to employees feeling overworked and stressed.
Potential for Burnout
Salaried employees may be more prone to burnout than hourly workers. This is because they are often expected to work longer hours and take on a higher workload. Burnout can lead to decreased productivity, decreased job satisfaction, and increased turnover.
There’s no one size fits all approach of knowing who to hire for your small business. If costs are your only consideration, hourly workers might make more sense. However, there are other indirect costs that come with that. The best thing you can do for your small business is to analyze the demands of your company. Check that your business needs are in line with the expectations that come from a particular type of worker. It might also be worth noting that it’s easier to move an hourly worker to a salary, than take moving a salaried worker to hourly work. Either way, the needs and legal requirements of your business should be your main considerations.