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Glossary: HR & Recruiting Definitions

What are Types of Salary?

There are a few different types of salary that you may come across in your career. Here we will provide a brief overview of some of the most common salary types and their cons and pros.

Hourly Salary

Hourly salary is a type of wage that is paid based on the number of hours worked. This type of wage is typically used in jobs that are not salaried, such as retail or food service jobs. To calculate an hourly salary, simply multiply the number of hours worked in a week by the hourly pay rate. For example, if someone makes $10 per hour and works 40 hours per week, their weekly salary would be $400.

If you’re considering an hourly salary, weigh the pros and cons carefully. Below we explain the major pros and cons of Hourly Salary.

Hourly Salary Pros

The best thing about being paid hourly is that an employee can easily budget their expenses. It’s easy to calculate exactly how much money they’ll bring home each week, so it makes it simpler to calculate bills and other payments. Additionally, if someone works more hours one week, they’ll earn more money. This can be helpful if there are unexpected expenses that come up. 

Finally, hourly workers typically have the opportunity to receive overtime pay for working a certain number of hours. For example, if they normally work 40 hours per week, but work 50 hours one week, they would be paid time and a half for the 10 extra hours. This can help to boost their earnings when needed.

Hourly Salary Cons

One of the main disadvantages of an hourly salary is that it can fluctuate greatly from week to week. This can be a particular problem if the employee’s hours are cut back or if they have to work fewer hours for any reason. This can make it difficult to budget and can lead to financial insecurity.

Another downside of being paid by the hour is that it can be hard to get ahead financially. It can be difficult to save money or pay off debt when an employee’s income varies so much from week to week. And, if they do manage to save up some money, there’s always the risk that their hours will be cut back and they’ll have to dip into their savings.

Finally, hourly salaries can also create tension in the workplace. If some employees are paid hourly and others are salaried, there can be a feeling of unfairness. And, if someone’s hours are cut back, it can be hard not to take it personally. After all, it feels like a direct reflection of their worth as an employee.

Salary by commission

A commission is a fee that’s paid to an employee based on their performance. This means that if an employee meets or exceeds their sales goals, they’ll earn a commission on top of their base salary. Commissions are typically a percentage of sales, and can vary depending on the product or service being sold. For example, a real estate agent may earn a lower commission on the sale of a home than they would on the sale of a commercial property.

While commissions can be a great way to boost an employee’s income, it’s important to remember that they can also be unpredictable. For this reason, look at the pros and cons before making a decision:

Salary by Commision Pros

There are several pros to paying by commission. Perhaps most importantly, commission-based pay provides employees with an incentive to increase their sales and performance. This can be a major benefit for employers, as it can lead to increased productivity and profitability. 

Additionally, commission-based pay can attract and retain high-performing employees, as they are more likely to be drawn to roles that offer the potential for high earnings. Finally, commission-based pay can help to align the interests of employees with those of the company, as employees who are successful in increasing sales will directly contribute to the bottom line.

Overall, commission-based pay can be a great way to motivate employees and boost performance. 

Salary by Commision Cons

One of the key disadvantages of paying by commission is that the employee’s earnings can be very unstable. This can make it difficult to budget and plan for their future, as they never know exactly how much they’ll be bringing home each month. Additionally, if sales are slow, they may find yourself struggling to make ends meet.

Another downside to commission-based pay is that it can create a lot of pressure and stress. The employee may feel like they’re always chasing after that next sale, and this can lead to burnout. What’s more, if they’re not meeting their sales goals, they may start to feel like a failure.

Finally, some people simply don’t do well under pressure and may not be cut out for a commission-based job. 

Salary by Projects or Task

When it comes to salary, there are two different approaches that companies take. The first is to base salary on the specific projects that an employee works on. This means that employees are paid based on the size, scope, and difficulty of the projects they work on. 

The second approach is to base salary on the task definition. This means that employees are paid based on their job title and responsibilities, regardless of the specific projects they are working on.

There are pros and cons to both approaches and we outline them below:

Salary by Project or Task Pros

The advantages of being paid by the project or task are many. Perhaps the most obvious is that the employee can make a lot more money than if they were paid hourly. If they’re a skilled worker, they can easily earn two or three times as much per hour.

Another big advantage is that they have a lot more control over their work schedule. They can take on as much or as little work as they want, and can structure their time in whatever way works best for them. This can be a huge benefit if they have other commitments outside of work, such as family or school obligations.

Finally, being paid by the project or task can also help to improve an employee’s job satisfaction. When they’re not stuck in a 9-to-5 rut, they’re more likely to enjoy their work and feel proud of their accomplishments. And when they know that they’re being paid based on their performance, it can motivate them to do their best.

Salary by Project or Task Cons 

There are a few potential cons to using a salary-by-project or task system in your business. First, it can be difficult to keep track of all the different projects and tasks that each employee is working on. This can make it difficult to accurately pay employees their correct salary. 

Additionally, this system can create a lot of paperwork and administrative work for HR and accounting departments. Finally, some employees may feel like they are constantly being monitored and evaluated under this system, which could lead to feelings of stress or anxiety. If you’re considering using a salary-by-project or task system, make sure to weigh these potential drawbacks before making a decision.

Another potential drawback of using a salary-by-project or task system is that it can create a lot of paperwork and administrative work for HR and accounting departments. This is because each employee’s salary would need to be tracked and recorded separately, which can be time-consuming and difficult to manage.

Now that you have decided which type of salary is the best for your business, check out our article on 7 trends to improve your talent attraction and develop the best hiring process!


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