Ways to Pay Your Staff- Hourly Rate
Hourly Rate
An hourly rate pay scheme is where your employees are paid a set rate (before tax) for each hour that they work. They may have a set minimum number of hours, or it may change each week/month.
For Example:
If an employee earns £8 an hour, and works for 34 hours in a week, they will earn £272 before tax in that week.
Advantages of hourly rate:
Employees that work less than their normal hours (either for personal or business reasons) do not need to be paid for a full weeks work. This means that if sales lower or if your business is seasonal; you are not left paying for more employee time than is actually required. Under an Hour Rate pay scheme, employees that work extra hours are paid accordingly, and are therefore much more likely to feel their effort is appreciated by your business.
An hour rate pay scheme makes flexible hours (flexitime) or ‘rota’ schemes much easier to administrate, as your employee’s hours can be adjusted to meet the expected level of work required.
Disadvantages of hourly rate:
The biggest problem with Hour Rate pay schemes is that employees may worry about hours being cut, leaving them worse off financially. If hours do change regularly, this may have a negative effect on an employee’s relationship with your business; as they may no longer feel secure in their job. Another problem with Hour rate pay schemes is that they are more costly to administrate and account for than salary schemes. Each employee’s hours and tax needs to be calculated, which takes up time and is therefore more costly than with salary based pay schemes.
When should it be used?
Hour rate pay schemes are most appropriate for jobs that have variable hours, or use flexible time; where sales or production levels are not a major part of the job.
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