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I am confused about the meaning of "salaried" vs. "hourly" payment, when it comes to matching it up with work life as I know it.

I think I know the abstract definition; to paraphrase what is e.g. outlined in the tag description:

  • A salaried employee receives a fixed amount of money (e.g. each month), and it doesn't matter how many hours they actually work.
  • An employee who is paid by the hour receives a certain amount of money for each hour worked, and they are paid the exact amount of money matching the hours worked.

This is explained time and again in many posts on this site, e.g. in that answer (to name just a single example):

(...) someone accused you of "stealing" by working a half-hour less. (...) for a paid employee I don't think this accusation would make sense. If you were paid by the hour, your time-tracking would reflect your 9-to-16:30 workday, so you wouldn't be paid for the missing half-hour anyway. If you were salaried, you'd be expected to use your professional judgment about how you provide value to the company and when you do your most productive work.

So, what am I?

The following statements apply to me (as per my work contract and/or as a direct consequence thereof):

  • I get a fixed annual salary of X €, distributed evenly across 12 months.
  • The regular weekly working time is 40 hours.
  • When necessary for the company, I can be required to work overtime within legal limits, for which (as per the contract) I receive no extra money.
  • In practice, I can compensate for said overtime by working less on other days, though it is not guaranteed, should there ever be so much existentially crucial work to be done.
  • If possible while meeting the job requirements, I can use flextime to compensate for that overtime.
  • If I work less than those regular 40 hours, I will not get proportionally less money, but (at the very least) a reprimand (the rationale being that I am supposed to work for 40 hours for my money, as stated in my contract, and not less).

As far as I can tell, something like this is pretty much the norm at least in software development (probably covering many more types of jobs) at least in Germany (possibly in most or all of the EU), for all levels, i.e. starting at entry-level positions up to project management.

So, would I describe this arrangement as:

  • "salaried" - because a fixed salary is agreed upon in advance and there is no way the salary gets adapted based on my working hours

or as

  • "hourly" - because it very much plays a role how many hours I work and working less than agreed upon would imply I get some of my payment undeservedly

?

O. R. Mapper
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  • "A salaried employee receives fixed amount of money and it doesn't matter how many hours they work.": it does matter. From your description, you don't look like the average salaried one (that has overtime paid, with a max. of hours/week). Looks like you work on a daily basis: you're expected to work 40 h/week with no extra money, but to compensate extra hours, your yearly total is much more than average. Generally intended for higher management, seniors, executive and so on... In some countries in Europe, it's called 'salaried with daily cap' (don't know the exact translation). 1/2 – OldPadawan Apr 03 '23 at 06:48
  • @OldPadawan: "Generally intended for higher management, seniors, executive and so on..." - but the payment model I describe is pretty much standard even for entry-level programmers here. I actually got the standard contract text that every employee at my company gets. And the contracts from the other positions I was offered back when I was applying did not look substantially diffrent, either. – O. R. Mapper Apr 03 '23 at 06:52
  • 2/2. It means that you agree on a yearly salary, no matter how much you work, as long as the job is done. There are such legal contracts in European countries, where seniors/managers/executive are paid for the result of their work, which can't be achieved by working fixed hours, or even a certain amount of hours. – OldPadawan Apr 03 '23 at 06:53
  • I'm not sure about Germany, that's why I just give a broader (and less accurate maybe) "european" definition. But "when necessary for the company, I can be required to work overtime within legal limits, for which I receive no extra money" for an entry-level salaried job does seem a bit weird though – OldPadawan Apr 03 '23 at 06:55
  • @OldPadawan: "It means that you agree on a yearly salary, no matter how much you work, as long as the job is done." - that's not what it means in practice. In general, when my eight hours are more or less over, I stop working for the day - even if it means some tasks are not finished yet on time. Yes, I handle this flexibly, I sometimes do work up to the legally allowed 10 hours if there are urgent things to finish, they are small enough that they can realistically be finished soon, and it matches with my personal schedule. But, while the possibility exists in theory, I have never been ... – O. R. Mapper Apr 03 '23 at 06:59
  • ... ordered to do overtime by the company (or any previous employer, for that matter). – O. R. Mapper Apr 03 '23 at 07:00
  • "for which (as per the contract) I receive no extra money": Please note that this illegal/void unless you make more than "Beitragsbemessungsgrenze (84.600 Euro im Westen, 81.000 Euro im Osten im Jahr 2022)". – nvoigt Apr 03 '23 at 07:56
  • What you describe is pretty common in Germany, and definitely 'salaried' since you get a fixed sum every month and you're not paid by the hour. Sidenote: In German, there's two seperate words for your compensation. "Gehalt" = salary, whereas "Lohn" implies an hourly compensation, with 'wage' being the correct translation. – Mookuh Apr 03 '23 at 10:02
  • @nvoigt : that +/- confirms my doubts about that part in my first comment. Any chance you clarify this in your (future) answer? :) seems related -> working time DE and what is overtime? – OldPadawan Apr 03 '23 at 11:11
  • @nvoigt: Interesting. Indeed, I have never encountered the situation anywhere that anyone was ordered to do overtime, so the case has not come up for discussion yet. I just know some of my managers and colleagues proactively reset their accumulated flextime balance to 0 at the end of each year, referring to the respective clause in the contract. – O. R. Mapper Apr 03 '23 at 11:20
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    Well, I guess that's fair, since the company on the other side is not required to pay you overtime, if they did not order it. So basically what is left at the end of the year is just bad time management and should not exceed a few hours. I know there's always people flexing with how bad they are at their job that they need to rack up enourmous overtime accounts... that is their problem, not yours. – nvoigt Apr 03 '23 at 12:14
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    "I get a fixed annual salary..." -- You have a salary; you're salaried. – Daniel R. Collins Apr 03 '23 at 17:34
  • @nvoigt: I believe the "not paid for overtime" is ambiguous in the sense that it's legal (even preferred) to compensate for overtime by free time rather than payment. So not paying is legal, but not compensating is not. – cbeleites unhappy with SX Apr 04 '23 at 19:01
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    @cbeleitesunhappywithSX: Most contracts I came across had a very explicit statement (always with the same wording, I think), saying that in the case of being ordered to work overtime, said overtime is compensated for by the fixed salary. – O. R. Mapper Apr 04 '23 at 20:58
  • @O.R.Mapper: AFAIK that needs particular circumstances (management positition + salary above Beitragsbemessungsgrenze) or the maximum amount of overtime that is included in the salary must be specified and cannot be too high. A general "all overtime is compensated already by the fixed salaray" for normal employees is void. (I've regularly met other "copy&paste" clauses in employment contracts that are also void. Employer possibly didn't change the contract template after relevant court decisions or they may try to bully the employee into desired behaviour by irrelevant text that looks binding) – cbeleites unhappy with SX Apr 05 '23 at 13:28

7 Answers7

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This is salaried.

My working contract (UK) works in exactly this way.

My contract states a particular number of hours I should work each week, but this is flexible. I keep a time sheet so if I work more hours one week, I can choose to work fewer the next week or vice versa within pre-agreed limits.

If a particular project requires overtime, this can be paid extra with pre-agreement with my manager.

ThaRobster
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I mean, from what you've described (especially the part about working the occasional OT for no OT Pay) is quintessential Salaried.

TheDemonLord
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  • that does not answer the OP according to the country tag though, seems just like a guess/opinion with no strong/legal base and no back-up – OldPadawan Apr 03 '23 at 08:03
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    @OldPadawan given the "Europe" tag then the info supplied is fine. – Solar Mike Apr 03 '23 at 08:59
  • It does seem to be this simple, though. The one big difference between hourly and salaried is the hourly employee gets a different paycheck if he works 41 hours in a week. The salaried employee does not. (In America, it's often also true that benefits are different between hourly and salaried, but it's not actually a rule.) – JamieB Apr 04 '23 at 14:14
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The way you defined salaried and hourly the vast majority of workers in Germany are not covered by either definition.

I would understand salaried to mean you have a work contract that specifies not only your salary but also the numbers of hours (usually per week) as well as a whole list of other conditions and rules of your work. This covers the vast majority of workers.

An hourly paid worker is essentially someone who is self-employed and rents out their services by the hour. This is only suitable for some specific tasks, for most tasks self-employed people are paid per task done and the amount of hours they spend on it is not part of the contract.

quarague
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  • An "hourly paid" worker is not self-employed. Hourly paid simply means the payroll is based on hours actually worked - in other words, there is some kind of timesheet kept for the purposes of calculating pay. – Steve Apr 04 '23 at 17:55
  • I'd suggest to clarify the answer: @Steve, hourly contracts are legally possible only for self-employed/freelance workers or business owners in Germany. Employees have the right (by labour law) to have a weekly or monthly number of working hours and also either the hourly wage or the monthly salary given in the working contract. – cbeleites unhappy with SX Apr 04 '23 at 18:58
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    @Steve: also, in the EU timesheets must be kept now for almost all salaried employees. – cbeleites unhappy with SX Apr 04 '23 at 19:07
  • @cbeleitesunhappywithSX, here in the UK, the compulsions on employers are weaker. "At-will" employment has been outlawed in the UK since 1964 (when minimum notice periods after a month's service were introduced), but there remains a category of agency worker with ill-defined rights (and who most closely resemble the pre-1964 hourly employee). Today, an "hourly paid worker" who is a permanent employee, will typically be categorised as such because they are entitled to paid overtime, or because there is some variability about their working hours and pay. It definitely doesn't mean self-employed. – Steve Apr 05 '23 at 07:49
  • @cbeleitesunhappywithSX, also with regard to timesheets, I've also left a remark on my own answer where you made the same comment. I don't believe employers in the UK are compelled to keep timesheets, they're only compelled to ensure staff don't exceed 48 hours a week (which for the average staffer, would be 10 hours overtime every week). Perhaps some employers hitch their monitoring to the building access control systems, but it's relatively unusual for salaried staff to have to complete any kind of explicit timesheet. – Steve Apr 05 '23 at 07:56
  • @cbeleitesunhappywithSX Citation needed. AFAIK, the EU working time directive does not require keeping of timesheets. I work and live in the Netherlands, and at my current employer I don't need to fill out timesheets (except one that is used to claim certain government subsidies for innovation). At my two previous employers I only had to fill out timesheets because that was used to bill our customers. Maybe a specific country has added the requirement to their law implementing the EU directive, but that doesn't mean this applies in the entire EU. – Mark Rotteveel Apr 05 '23 at 10:43
  • @MarkRotteveel: Germany has been reluctant to update their labour law according to the ECJ decistion, but there's German court decision since last year (https://www.bundesarbeitsgericht.de/entscheidung/1-abr-22-21/) that spells out that there must be a system to record start and end of work, and thus duration in an objective, reliable and accessible manner. – cbeleites unhappy with SX Apr 05 '23 at 13:02
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    @Steve: See my comment to Mark Rotteveel. This is post-Brexit EU, and it is also not directly in the directive but there are ECJ and BAG (for Germany) court decisions that say it follows from (long list of legislation, ranging from labour directive to human rights). – cbeleites unhappy with SX Apr 05 '23 at 13:07
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The concept of hourly vs. salaried doesn't really apply in Germany.

WorkingHard_Guy
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There isn't always a clear distinction between salaried and hourly employees.

Traditionally, hourly employees were those who had to clock in and out (in some way or another), and who had their wages reckoned according to their start and finish times. If they didn't turn up they didn't get paid during their absence, if they chose to leave early then their pay stopped, and if they were laid off and told to go then their pay stopped on departure. Any kind of "overtime" (however defined) is also paid for. The employment was often "at will".

Salaried employees were often "staff" in the traditional sense - permanent employees who performed various supporting functions, who were typically responsible for setting their own pace of work and attending as necessary, and whose pay was not reckoned according to hours of attendance or measurable output. The traditional implication of being salaried was that pay would continue during holidays, sickness, or any other kind of absence (such as adverse weather, or bereavement).

Nowadays, hourly employees are often entitled to holidays by law, may be covered for sickness, and salaried employees might not be considered particularly responsible workers, may have their hours and working pace monitored closely, and may be entitled to no sick pay and no more leave than those on hourly pay.

Partly what has eroded the distinction is that the law has over time reduced the legal scope for distinction, and partly more jobs have come to resemble the traditional staff jobs in content more closely than they resemble "workforce" jobs.

Steve
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    In the EU, it is required to track working hours for almost all salaried employees. – cbeleites unhappy with SX Apr 04 '23 at 19:06
  • @cbeleitesunhappywithSX, yes, the legal requirement that certain working hours limits are not exceeded is one example. The need to maintain a fire register, and the existence of access control systems, are more examples where effectively the modern "staff" have their hours systematically recorded and are monitorable in ways that formerly only the "workforce" suffered. – Steve Apr 05 '23 at 07:34
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    @cbeleitesunhappywithSX Citation needed. As far as I'm aware, there is no hard requirement in the EU directive to track it (see also my reply to your other comment). It is just that employers must ensure that employees do not exceed 60 hours per week (peak), or 48 hours per week on average over (IIRC) 5 weeks. That can be done by fostering a workplace culture that doesn't promote excessive overwork, looking out for your employees, or by bureaucracy of keeping timesheets or the like. – Mark Rotteveel Apr 05 '23 at 10:50
  • @MarkRotteveel, agreed. In practice, an employer can meet their obligations by simply issuing a rule to staff that excessive hours are not to be worked, that attendance is to be limited to 5 days, and meaning it. It's very hard to exceed either the 60 hour limit in one week, or 48 hours on average, without something else being seriously out of whack - especially as breaks and dinnertimes don't count. – Steve Apr 05 '23 at 12:27
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    @MarkRotteveel: AFAIK you are right in that the EU directive does not specify tracking. However, there's an ECJ decision (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62018CJ0055) that clarifies that working hours must be recorded in a fashion enabling proof at a court of whether the regulation was violated or not. Violations are not only daily and weekly limits of working hours, but also minimum rest times (e.g. proove that the rest between end of work and beginning was > 11h). The court also says that you cannot prove correct recording of overtime without first recording regular – cbeleites unhappy with SX Apr 05 '23 at 12:48
  • working hours. Also, the record must be transparent and objective in the sense that the employee can verify the records. If you read German, here's a detailed discussion on the implications and options for compliant recording: https://www.hugo-sinzheimer-institut.de/faust-detail.htm?sync_id=8857 – cbeleites unhappy with SX Apr 05 '23 at 12:50
  • @cbeleitesunhappywithSX Thanks – Mark Rotteveel Apr 05 '23 at 16:05
  • @cbeleitesunhappywithSX, that's certainly an interesting judgment, but what if the employer simply delegates the responsibility to the employee themselves, and the records reside with each employee (such as in a personal diary)? – Steve Apr 05 '23 at 16:09
  • @Steve: AFAIK (for Germany) the employer cannot simply delegate their full legal responsibility here to the employee. The German-language report I linked says that the employer needs to know beginning and end of work in a timely manner because they are required to check that the employee doesn't violate labor law. That check AFAIK cannot be delegated by "you make sure to obey labor law". IMHO a diary would be legal, but would need to be tamper-proof. Employer regularly signing off the diary, and corrections getting both employee + employer signatures should work. – cbeleites unhappy with SX Apr 06 '23 at 09:56
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    @cbeleitesunhappywithSX: I'm not so sure about that: The primary purpose of the regulations around timesheets seemed to be that the employee has some recorded proof of their working times to use against the employer - be it to request overtime compensation, or to prove exactly what you point out, that they had to work beyond legal work limits. Therefore, after the initial panic about what the court decision might mean, from what I have seen and heard from others, common practice appears to be that any place with "Vertrauensarbeitszeit" has employees fill out their own timesheets ... – O. R. Mapper Apr 06 '23 at 10:52
  • ... and, if this wasn't happening before, anyway, collects those timesheets. This way, employees have documentation for their working times, should they want to request e.g. overtime compensation, and employers cannot claim they did not know because they are now obliged to collect the timesheets. But then, I guess this means the "full legal responsibility" is not just with the employee, but actually, with the employer, by obliging them to collect the timesheets. – O. R. Mapper Apr 06 '23 at 10:52
  • @cbeleitesunhappywithSX, surely the employer can delegate. There are clearly many situations where only the worker themselves knows when they are on the clock and when they aren't - and some kinds of staff work can involve blurred lines even for the worker. In terms of there being some kind of requirement to centrally collate records, for records to be regularly reviewed and approved independently, or for the records to be resistant to tampering, I think that's going beyond the general rule. In my view, the judgement requires an appropriate system, not a specific form of system. – Steve Apr 06 '23 at 12:38
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The distinction doesn't make much sense because labour law in means that an employee can pretty directly convert between hourly wage and monthly gross salary, and we switch back and forth between both points of view.

  • This is because the employment contract must specify both the working time (weekly or monthly hours) and either the monthly gross salary (which can basically be divided by the fixed number hours) or the hourly wage (from which the monthly gross can be calculated).
    (There are 13/3 weeks in a salary month)

  • A time sheet must be kept for almost all (salaried) employees

  • Employees have the right to temporarily or permanently "downsize" their contract to part-time, and to go back to full-time, with their monthly gross being proportionally adjusted (i.e., a hourly wage is applied to the working hours).

  • German labour law makes free time the preferred compensation for overtime, and even prescribes that the free time must be given within a specified time frame. Payment for overtime will then happen only when the employment contract ends before the overtime can be compensated by free time (same for holidays).

(There are special rules for e.g. shifts and on-call time, and more extensive possibilities in certain sectors like healthcare)

Because the working contract has to specify weekly/monthly working hours, hourly payment without a pre-agreed number of hours is legal only outside employment contracts. I.e., with self-employed/freelancers/business-owners and of course a business may bill their customers by the hour (but has to pay their employee for the pre-agreed number of hours per week/month).

cbeleites unhappy with SX
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As far as I'm aware, you'd not be 'hourly'. But I don't know of any contract in Europe that works the way you say.

Contracts for a fixed-time, or unrestricted duration are always 'x€ / month for 40 hours of work' with any work above those 40 hours being compensated either in money or granted as time-off later.

In those cases you'd be expected to work at least 40 hours for obvious reasons, but you wouldn't lose any money if you did happen to work less (your manager would probably be pissed off though).

Aeolun
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  • "Contracts for a fixed-time, or unrestricted duration are always ..." - as I've clarified in the comments, that is actually what applies, even though the compesnation with flextime is not explicitly mentioned in my contract and I may not be able to make use of it in exceptionally dire situations. I will edit the question accordingly. – O. R. Mapper Apr 03 '23 at 07:39
  • The Netherlands has something called a "Zero-hour" contract. Which more or less acts as an "on call" or "short notice" contract: you work X hours whenever your employer needs you for X hours. This has some advantages for some groups of people (say women who're willing to work a few hours while their kids are at school), but has lots of potential for abuse. Which is why the government is going to make it much harder to create such contracts. – Abigail Apr 03 '23 at 16:15
  • Careful there with the sweeping generalizations. Europe is fairly big and diverse. For example, in Czechia even formally "salaried" people typically have their monthly pay calculated using an hourly rate, so the exact amount they get every month fluctuates depending on the number of workdays in each month. I'm sure there are other countries with similarly arcane systems. And as Abigail correctly notes, even the country listed in your profile (NL) does have contracts that work as "hourly". – TooTea Apr 04 '23 at 11:51
  • @O.R.Mapper: In Germany, the compensation by free time doesn't need to be mentioned in the contract since German labour law basically says that free time is the preferred way to compensate for overtime, and in the "default" setting payments will only happen if this compensation is not possible (e.g. you give notice but have too much holidays plus overtime left for the notice period). – cbeleites unhappy with SX Apr 04 '23 at 18:53
  • @TooTea 0-hour contracts are essentially a contract in which you are only paid overtime, because all hours above the default (0) you work are considered overtime. I don't think that's inconsistent with what I wrote above?

    Anyhow, just the fact that I do not know of a contract in Europe that works a certain way doesn't mean it doesn't exist.

     – Aeolun Apr 05 '23 at 01:03