Salary: security and predictability
A salary is a fixed monthly payment that employees receive regardless of the hours they actually work. This type of pay is usually tied to working hours set in the contract, for example 40 hours a week.
This means employees receive their full salary even in a week in which they work fewer than the agreed hours. Overtime can and should be set out individually in the employment contract.
Advantages of a salary for employees:
- Stability and security: A fixed salary means the same income every month, regardless of the hours actually worked. This gives financial certainty for planning.
- Easier access to loans: Banks and lenders prefer employees with a fixed salary because it counts as stable income. This often makes loan applications easier.
Disadvantages of a salary for employees:
- Overtime without extra pay: In some cases overtime is not paid separately if the employment contract or collective agreement says so. This means employees may work more without receiving extra pay. Even so, weekly working hours should be clearly set out in the contract.
Advantages of a salary for employers:
- Cost control: A fixed salary allows precise budgeting and simplifies the calculation of staff costs.
- Employee retention: A stable salary often makes employees feel tied to the company in the long term, which can reduce staff turnover.
Disadvantages of a salary for employers:
- Limited adaptability: When the workload varies greatly, a fixed salary can lead to inefficient costs because employees must be paid in full even when there is little work.
- Overtime can become expensive: If overtime does have to be paid, it can quickly drive up staff costs.
Hourly wage: flexibility and pay that reflects work done
An hourly wage is a type of pay in which employees are paid based on the number of hours they actually work. This pay is tied to working hours set in the contract. Any hours above or below that are paid accordingly.
Large deviations, especially downwards, should be avoided, though. Employees on an hourly wage are also entitled to the working hours agreed in their contract. Being paid by the hour can be particularly attractive for employees who want to organise their working time flexibly. It also carries the risk of fluctuating income.
Advantages of an hourly wage for employees:
- Pay for the hours actually worked: Employees are paid directly for the hours they actually work, which can mean higher income when they work overtime.
Disadvantages of an hourly wage for employees:
- Fluctuating income: In practice, the number of working hours can vary considerably depending on the workload. This can create uncertainty in financial planning.
Advantages of an hourly wage for employers:
- Flexible staff costs: Employers only pay for work actually done, which is especially useful in industries with a fluctuating workload. Even so, the employer should pay the hours agreed in the contract. The employee should work them.
- Influence on hours worked: When employees are paid directly for their hours, this can affect their willingness to put in the working time.
Disadvantages of an hourly wage for employers:
- Fluctuating staff costs: In times of high demand, staff costs for hourly workers can rise quickly.
- Weaker employee retention: Because their income is uncertain, employees may leave sooner, which can lead to higher staff turnover.
Salary vs. hourly wage: which is better?
Whether a salary or an hourly wage is the better choice depends heavily on individual requirements and preferences. For employees who value stability and security, a fixed salary is often more attractive.
Employers who need flexibility in staff costs, on the other hand, may prefer an hourly wage. It is worth reviewing your own priorities. If needed, have an open conversation with your employer to find the best solution.
