Same job, different pay structure — here's what really differs on payday.
Updated October 2026.
"Salaried" and "hourly" describe how your pay is structured, not how much you are worth. The practical differences matter more than most job offers explain, and the biggest one is overtime.
Under the federal Fair Labor Standards Act (FLSA), employees are either non-exempt or exempt. Non-exempt employees must be paid one and a half times their regular rate for hours worked beyond 40 in a week. Exempt employees are not entitled to overtime pay, however many hours they work.
Nearly all hourly workers are non-exempt. Being salaried does not automatically make you exempt, though. To be exempt under the main federal exemptions, an employee generally has to meet all three of these tests:
A salaried employee who fails any of these tests is owed overtime. Job titles do not decide it. Several states set a higher salary threshold than the federal one. California's, for example, is twice the state minimum wage for full-time work, which comes to more than $70,000 a year in 2026.
Take an hourly worker at $25 an hour who works 45 hours in a week. The first 40 hours pay $1,000. The five overtime hours are paid at $37.50, adding $187.50, for a total of $1,187.50. A salaried exempt employee working the same 45 hours is paid the same as for a 40-hour week.
From 2025 through 2028 there is also a federal income tax deduction for qualified overtime pay. It covers the premium portion, the extra "half" in time and a half, up to $12,500 a year ($25,000 for a married couple filing jointly), and it phases out at higher incomes. Overtime is still subject to Social Security and Medicare tax, and to state income tax in most states.
Salaried employees get the same paycheck every period, whatever hours they worked that week. Employers generally cannot dock an exempt employee's salary for a partial-day absence or because work was slow, and doing so can put the exemption at risk.
Hourly employees are paid for hours worked. A short week or a slow season shows up directly in the paycheck, and so does a long one.
Salaried positions are more often full-time roles with paid time off, health insurance and a retirement match. That is a pattern, not a rule. Plenty of hourly jobs come with full benefits, and eligibility usually depends on being full-time, not on how pay is structured. When comparing offers, put a dollar value on the benefits as well as the pay.
Once gross pay for the period is known, taxes and other deductions work the same way for both. Federal tax, FICA and state tax are calculated on the gross figure, whether it came from a fixed salary or from an hourly rate times hours.
The one practical difference is that hourly pay varies, so withholding varies with it. A week with heavy overtime is withheld at a higher rate, as if you earned that much all year. It evens out when you file your return.
To compare an hourly offer with a salary, multiply the hourly rate by hours per week and then by 52. A full-time 40-hour week comes to the hourly rate times 2,080. To go the other way, divide the salary by 2,080.
| Hourly rate | Annual pay at 40 hours a week |
|---|---|
| $15 | $31,200 |
| $20 | $41,600 |
| $25 | $52,000 |
| $30 | $62,400 |
| $40 | $83,200 |
| $50 | $104,000 |
A fair comparison uses the hours you would actually work. A $62,400 salary that routinely takes 50 hours a week works out to $24 an hour. An hourly job at $25 with the same 50 hours pays $71,500, because ten of those hours are paid at time and a half.
Neither is better in general. Hourly pay rewards extra hours and protects you from unpaid overtime. Salary gives a predictable paycheck and often comes with more flexibility over when the work gets done. The useful questions for any offer are how many hours the job really takes, whether those hours are paid, and what the benefits are worth.
Sources: U.S. Department of Labor, overtime pay; U.S. Department of Labor, Fact Sheet 17A.