The table below shows the typical hours worked by employees at a company. A salaried employee makes $67,000 per year. Hourly employees get paid $25 per hour, but get $37.50 per hour for each hour over 40 hours.
| Sun. | Mon. | Tues. | Wed. | Thurs. | Fri. | Sat. |
|---|---|---|---|---|---|---|
| 0 | 10 | 8 | 8 | 7 | 6.5 | 4.5 |
Which of the payment options would you recommend to a new employee?
A. Either one. Hourly and salaried employees earn the same amount per week.
B. Hourly pay. Hourly employees make more per week than salaried employees.
C. Salaried pay. Salaried employees make more per week than hourly employees.
D. There is not enough information given to compare weekly earnings.
Answer (2)
Calculate the total hours worked per week: 0 + 10 + 8 + 8 + 7 + 6.5 + 4.5 = 44 hours.
Calculate the hourly employee's weekly earnings: ( 40 × $25 ) + ( 4 × $37.50 ) = $1000 + $150 = $1150 .
Calculate the salaried employee's weekly earnings: 52 $67 , 000 ≈ $1288.46 .
Compare the earnings and conclude that salaried pay is better: \$1150"> $1288.46 > $1150 . The final answer is Salaried pay.
Explanation
Calculate Total Hours Worked First, we need to calculate the total hours worked per week by the hourly employee. From the table, we have: Sun: 0, Mon: 10, Tues: 8, Wed: 8, Thurs: 7, Fri: 6.5, Sat: 4.5. Adding these up, we get a total of 44 hours.
Calculate Hourly Employee's Weekly Earnings Next, we calculate the weekly earnings for the hourly employee. The employee works 44 hours, so they have 4 hours of overtime (44 - 40 = 4). Their regular pay for 40 hours is $25/hour, and their overtime pay is $37.50/hour. So, the regular pay is 40 hours × hour $25 = $1000 , and the overtime pay is 4 hours × hour $37.50 = $150 . Therefore, the total weekly earnings for the hourly employee is $1000 + $150 = $1150 .
Calculate Salaried Employee's Weekly Earnings Now, we calculate the weekly earnings for the salaried employee. The annual salary is $67 , 000 . To find the weekly earnings, we divide the annual salary by the number of weeks in a year (52): 52 weeks $67 , 000 ≈ week $1288.46 .
Compare Weekly Earnings and Recommend Payment Option Finally, we compare the weekly earnings of the hourly and salaried employees. The hourly employee earns $1150 per week, while the salaried employee earns approximately $1288.46 per week. Since \$1150"> $1288.46 > $1150 , the salaried employee makes more per week than the hourly employee. Therefore, the salaried pay option is recommended.
Examples
Understanding the difference between hourly and salaried pay is crucial in the real world. For example, when negotiating a job offer, it's important to consider the typical hours you'll be working. If you anticipate working more than 40 hours per week regularly, an hourly position with overtime pay might be more beneficial. Conversely, if you prefer a stable income and typically work around 40 hours, a salaried position could be a better choice. By calculating and comparing potential earnings, you can make an informed decision that aligns with your financial goals.
After calculating, the salaried employee earns approximately $1288.46 per week while the hourly employee earns $1150 per week. Since the salaried employee has a higher weekly income, I recommend salaried pay. Thus, the answer is option C: Salaried pay.
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