3 Ways to Pay Your Employees: Hourly, Salary, and Commission
Sometimes, you decide whether you’ll pay your employees an
hourly rate, a salary, or a commission on goods and services sold. Other times,
your workers tell you how they would like to be paid. Either way, there are
things to know about each pay type before you decide. Consider what makes the
most sense for your company and the job.
If you pay a team member hourly, you’ll pay them a set rate
per hour worked. Hourly wages make the most sense for jobs that are directly
related to time in the workplace, like a retail salesperson or cashier.
There are several laws surrounding hourly rates, including
state and federal minimum wages. You’ll likely also have to pay your staff
members one and half times their hourly rate for any overtime hours worked above
40 hours in a workweek. Because workers can earn overtime pay, hourly wages benefit
anyone who regularly works a lot of hours.
Typically, you’ll pay your employees a salary if they’re in
a management position or their work is tied to results.
Salaries benefit your staff because they’ll always know how
much their paycheck will be, so they can create a personal budget without
worrying that their paycheck won’t cover everything.
Commissioned employees are paid based on the quantity of
goods or services they sell. Their pay equals a percentage of the revenue they
are directly bringing in. Consequently, a commission-based paycheck amount can
vary from pay period to pay period.
someone by commission makes sense when their job is directly tied to revenue,
and it can benefit your company because you’ll only pay them when they make a
sale. Commissions can also benefit your worker because their pay is tied
directly to their accomplishments, so they’ll be motivated to exceed their goals.
Typically, you can choose to supplement an employee’s salary
with commission or pay them commission in lieu of a salary. If a commissioned team
member does not make at least minimum wage, you may need to include an hourly
rate. You may also have to pay the individual overtime if they were on the job more
than 40 hours in a workweek.