In an organization with various structural management levels designed to communicate activities and assign sub-divided authority, roles, and responsibilities to its members, there is always a reward and punishment system set in place to enhance productivity and added-value. In terms of rewards, employees receive compensations for completed tasks and productive output – one of which includes the use of salary payment. In terms of hourly pay, piece-rate pay, and other approved compensation options, salary pay has its advantages and disadvantages. In this article, we will discuss some of these factors:
Pros Of Salary Paycheck
1. Employers And Employees Have More Flexibility Working
Implementing salary pay gives employers and employees the flexibility needed in their work routine. That way, they do not have to go through various rigid attendance policies, medical leave periods, and other organizational rules. For example, an employee may decide to avoid medical leave with the use of “comp time” or by converting the scheduled period to additional working hours, in order not to use the benefits attached to it. An employee can make adjustments to shift hours to create time for other important off-work agendas, such as teacher conferences, doctor’s appointments, emergencies, and many more.
2. There Is A Well-Defined And Stable Budget
Salary pay helps define the cost needed to plan a budget for each employee. That way an employer knows how much should be paid to the employees at a stipulated time period. In addition to having a well-defined structural pay, such an employer will need not to worry about overtime costs and other extra labour expenses in cases where employees put in extra time into their job duties.
3. Employees Can Make Plans For Their Own Finances
With a well-defined paycheck, employees can map out budgets to meet their financial needs. They can also plan for household-related bills, college fees, insurance, and even retirement. For example, an employee XYZ, who receives a monthly salary paycheck of $5,000 can decide to create a financial budget – $1,000 for rent, $750 for household-related bills and items, $400 for insurance, $1,000 for transportation and feeding, $1,000 for savings, $500 for investments, $100 for charity, and $250 for miscellaneous. This helps such an employee spend, save, and invest wisely.
4. It Gives Employees A Sense Of Prestige
Employees who earn sustainable paychecks from their employers are proud of being compensated for their productive input into the growth and sustainability of the organization. This achievement helps build a solid relationship between employees and employers and creates successful career records. There is a feeling of satisfaction and purpose that is derived when you complete certain allocated tasks for a firm and get a paycheck for doing so. You feel like you are valuable to such an organization and your input counts.
5. Employers Can Easily Process Payroll
Employees that are placed on a salary scale generally receive the same paycheck, regardless of their working hours. With this, employees do not need to clock in at work or keep track of time. This creates an easier payroll process.
6. An Early Shutdown Of Work Activities Implies A Full Pay Day
In cases where all work operations are halted and the activities for the day are ended abruptly, hourly workers would be paid based on the number of hours they put to work. On the other hand, employees on salary pay will still receive a full-day salary.
Cons Of Salary Paycheck
1. There Is Always An Exclusion On Overtime And Holiday Pay
Despite the fact that salaried workers are entitled to various pay incentives amongst which include holiday bonuses, they can’t claim overtime and holiday. This puts them at a disadvantage when compared to hourly workers that can earn several times more than normal wage on holiday and overtime. Regardless of the amount of time and effort put to work, a salary pay employee will only earn the salary slated for the month.
2. The Salary When Broken Down To Hourly Pay May Be Below The Minimum Wage
A salary worker that takes home a paycheck of $1,000 a month with an average of eight working hours a day, five days a week, may seem to be making a decent income. But when this paycheck is broken down to an hourly-waged scale, it just amounts to $6.25 per hour, which is even below the minimum hourly wage in the U.S ($7.25 per hour). This makes the salaried employee earn less than the hourly worker.
3. A Higher Preference Is Given To The Most Experienced Employee With The Lowest Salary Expectation
In a case scenario where two job applicants with equal qualifications are present for a job interview, the employer typically gives more preference to the applicant willing to accept the least pay, despite the fact that the productivity and output that would be delivered may be of a lower standard. This subpar work will be compensated via the lower salary.
4. Most Times Salaried Workers Are Paid Once Or Twice A Month
In some industries or organizations, hourly workers can be paid weekly. On the other hand, salaried employees only get to receive their paychecks once or twice a month. This payment scheme implies that for the rest of the month, salaried employees are responsible for their financial well-being and have to plan their expenses wisely.
5. The Base Salary Package Can Have Other Benefits Included In It
In some firms, the employee may have other benefits such as health insurance and housing allowance included in the total salary package. This implies that a salary package of $60,000 may only have $40,000 as the paycheck salary. This could also mean that the same salary package of $60,000 may be paid to compensate for the absence of other benefits that should have been included.
6. Paycheck Salary Is Most Times Paid Based On Equity Not Complexity
In most organizations, employers pay their employees salaries based on the amount other employers pay in other firms. Hence, an employee in firm ABC, gets the same or similar paycheck salary as another employee in firm XYZ, regardless of the complexities of the job requirements.
By addressing the vital points discussed in this article, the advantages and disadvantages of a salary pay can be beneficial to both the employer and employee.
