Salary and Hourly Wages: Explained for Employers

The main difference between hourly and salaried employees

Salary and hourly pay are the pay structures in which an employee will be paid. This is not to be confused with part-time or full-time working schedules.

Hourly employees are paid for each hour worked, so their paycheque reflects their exact hours worked during the pay period.

Salaried employees are paid a fixed amount per pay period. Their pay usually doesn’t change with minor fluctuations in hours worked, but this can vary. We explain more about these variables below.

How does salary work?

Employees who are paid a salary know their fixed annual pay in advance. This means their regular paycheque stays the same from period to period, even if their weekly hours vary somewhat, provided they are working their expected schedule under the terms of their employment.

Examples of roles that are typically salaried include:

• Professional roles: accountants, engineers, lawyers, consultants, IT specialists

• Managerial or supervisory roles: team leads, department managers, project managers

• Administrative and office roles: HR professionals, marketing coordinators, executive assistants

• Specialized technical roles: designers, analysts, architects, researchers

• ·Some creative or knowledge-based roles: writers, editors, software developers

Salary based pay means consistent pay for an agreed schedule, but worked hours, overtime and full-time status can still vary. For example, a salaried employee may not work their scheduled hours, or may work overtime, leading to a variance in their income.

A common misconception is the idea that only full-time employees may be salaried—this is false, as part-time employees can also be salaried.

Overtime and salary

A common area of confusion for employers is the belief that if an employee is salaried, that they aren’t entitled to overtime pay. This is false, and could cause significant issues if an employee isn’t compensated for any overtime hours worked.

Salaried employees should receive consistent pay for their agreed schedule, and if they consistently work beyond those hours, they should be compensated.

Most salaried employees are entitled to overtime pay if they work over a specified amount of hours in a week, but eligibility will vary depending on jurisdictional employment law.

Eligibility can vary per jurisdiction for threshold of hours worked, industries and job roles. Always check your jurisdictional employment legislation, and update your employment contracts accordingly.

The following provinces have set these thresholds for hours worked, but eligibility may still vary upon industry and job role:

• Ontario: Most employees that work in ESA regulated workplaces are entitled to overtime pay once they exceed 44 hours per week.

• British Columbia: Most employees in workplaces that are regulated by the BC ESA are entitled to overtime pay once they’ve exceeded 40 hours per week, or 8 hours in a day.

• Alberta: Most employees working in ESC regulated workplaces are entitled to overtime pay once they exceed 44 hours per week.

For detailed advice and information for overtime eligibility, we would always advise that you consult an expert. BrightHR offers a 24/7 employment relations advisory service for these situations.

Overtime and averaging agreements

When it comes to overtime, you may wish to have an averaging agreement with your employees.

Averaging agreements let employers and employees calculate overtime based on the average hours worked over a set period instead of weekly.

Averaging agreements must be voluntary, documented in writing, and follow provincial employment standards. Employees must still receive at least minimum wage for all hours worked, and employers must track hours accurately to calculate overtime correctly.

Authorized deductions from salary

Employers may make authorized deductions from a salaried employee’s pay where allowed by the employment contract, collective agreement, or applicable legislation. Such deductions must comply with minimum wage requirements and cannot affect statutory entitlements such as overtime or vacation pay. Unauthorized deductions are illegal.

Compliant examples of authorized deductions include:

• Statutory deductions: income tax, Canada Pension Plan (CPP), Employment Insurance (EI), and other legally required withholdings.

• Benefit premiums: contributions for health, dental, or other employer-sponsored benefits, if authorized in writing.

• Repayment of advances or loans: amounts previously advanced to the employee that are repaid according to an agreed schedule.

Important salary pay deduction notes for employers:

• Deductions must never reduce pay below minimum wage for the hours worked.

• Deductions cannot be used to bypass statutory entitlements, including overtime, vacation pay, or public holiday pay.

• Deductions must be transparent, documented, and authorized to avoid disputes or claims of breach of contract.

How do hourly wages work?

Employees that are paid through an hourly wage won’t necessarily be guaranteed a fixed income, as they may be scheduled to work more or less on a given week. They are paid exclusively on the time they work, which often allows for more flexibility with their scheduling.

Some common examples of hourly roles include:

• Retail staff, cashiers, and customer service associates

• Tradespeople, labourers, and warehouse workers

• Hospitality and food service staff (servers, cooks, housekeeping)

• Call centre and support desk employees

A common pitfall for employers is the understanding of statutory entitlements to things like leaves of absence, vacation and statutory holidays—regardless of pay structure. Hourly employees will have jurisdictionally mandated minimum requirements, and it is a critical area of compliance for employers.

Statutory entitlements for hourly employees

Just like salaried employees, hourly employees are entitled to the same statutory protections under provincial employment standards. The exact rules vary by province, so employers should always consult local legislation.

Minimum Wage

• Employees must be paid at least the minimum wage for all hours worked in a pay period.

• Deductions cannot reduce pay below this threshold.

Overtime Pay

• Employees may be entitled to additional pay for hours worked beyond the standard threshold established by provincial legislation.

• Employers should track hours carefully and apply the appropriate overtime rate as required.

Vacation Pay

• Employees accrue vacation pay based on hours worked or wages earned.

• The accrual rate, payout, and timing are determined by provincial legislation.

Public Holiday Pay

• Employees are entitled to pay for statutory holidays recognized in their province.

• If an employee works on a statutory holiday, additional pay or a substitute day off may apply, depending on local rules.

Leaves of Absence

• Provincial employment standards provide various leaves of absence. The type, duration, and eligibility criteria for each leave vary by province.

• Employers should consult provincial legislation to determine which leaves apply to their employees.

Other Protections

• Protection from unauthorized deductions from pay

• Protection from reprisals or adverse treatment for exercising statutory rights

When should an employee be salary vs hourly?

Deciding whether a role should be salaried or hourly isn’t a matter of preference, it depends on whether the position is structured around fixed responsibilities or tracked by hours worked. Misclassifying employees can create real risks.

For example, if you offer additional benefits to salaried employees but have an hourly employee performing the same work and hours, you face the risk of legal challenges for unequal treatment of employees performing the same work.

When a role should be salaried

Think of salaried employees as people whose work is measured by outcomes, responsibilities, or expertise, rather than strictly by the clock. These are often professional, managerial, or specialized roles where hours might fluctuate, but the focus is on completing the job. Leadership, decision-making, and long-term projects often fit here.

When a role should be hourly

Hourly employees are usually in roles where work is time or task-based and easier to track in hours, such as retail, trades, hospitality, or entry-level administrative positions. Hourly pay gives flexibility for variable schedules and ensures employees are compensated fairly for hours worked.

Key points when making your decision

Employee classification

Misclassifying employees can cause headaches with overtime, benefits, and compliance. Responsibilities can change for employees over time; an hourly employee could eventually be given full time work and responsibilities that are comparable to a salaried position—and the responsibility falls upon the employer to amend their contract.

Documentation must be accurate

Make sure contracts and policies clearly reflect the classification of your employees, and review them regularly to stay compliant.

Need help with pay structuring in your business?

BrightHR can help. We offer provincially compliant policy and contract templates, expert 24/7 HR advice for difficult situations, and a full suite of software to help you manage your employees effectively.

Book a demo today with one of our expert team to find out how BrightHR can help your business.