Two jobs with the same yearly pay can work out very differently depending on whether they pay a salary or an hourly wage. The structure decides whether extra hours earn extra money, how predictable each paycheque is, how vacation and holiday pay are worked out, and often which benefits you get. This guide compares the two. For converting one into the other, the hourly to salary calculator does the arithmetic; it is one of the income calculators.
The differences at a glance
| Feature | Salaried | Hourly |
|---|---|---|
| How pay is set | A fixed yearly amount, split across pay periods | A rate times the hours worked |
| Extra hours | Often no extra pay, especially for managers and some professionals | Overtime pay past the provincial threshold, for employees the rules cover |
| Paycheque size | The same each period | Varies with hours |
| Benefits | More often included for full-time salaried staff | Often depend on hours or status |
| Vacation and holiday pay | Usually built into the salary | Calculated under provincial rules |
Overtime
Overtime is often the biggest difference. Provincial employment standards set the point at which overtime starts (a daily threshold, a weekly one, or both) and the premium rate, and they exempt some kinds of jobs, which often include managers and certain professionals. Those rules apply to the job, not to whether it is called salaried: a salaried employee who isn’t in an exempt category can still be owed overtime. Each province’s thresholds and exemptions are in the overtime rules guide, and the overtime calculator works out a week’s pay.
Your effective hourly rate
A salary that comes with long hours and no overtime pay is worth less per hour than it looks.
A salary of $70,000 for 40 hours a week over 52 weeks works out to $33.65 an hour. If the job routinely takes 50 hours a week, the same salary is $26.92 an hour.
This effective rate is the fairer number to set against an hourly offer. The step-by-step salary formula covers the conversion by hand.
Benefits and retirement plans
Full-time salaried employees are more often eligible for an employer’s group benefits, pension or RRSP matching, and benefits such as life and disability insurance are often set as a multiple or share of salary. Hourly roles vary: some, particularly full-time and unionized ones, include the same plans. The total compensation guide shows how to put a dollar value on them when comparing offers.
Vacation and statutory holiday pay
For salaried employees, paid vacation and statutory holidays are usually part of the salary: pay continues on those days. For hourly employees, provincial rules decide vacation pay (how much and when it is paid) and statutory holiday pay (who qualifies, how a day’s holiday pay is calculated, and the premium for working on the holiday). The details are in the vacation pay guide and the statutory holidays guide; the stat holiday pay calculator works out a day’s holiday pay in Ontario, BC, Alberta and federally regulated jobs.
EI and income stability
Both salaried and hourly employees are usually in insurable employment, and EI eligibility counts insurable hours. Hourly workers whose hours fall can see both lower pay and fewer insurable hours, while a salary stays the same from period to period. The EI guides explain how hours and earnings feed into a claim.
When each structure tends to suit
Hourly pay often suits:
- jobs with frequent overtime, where the premium rate adds up;
- part-time or variable schedules, where pay follows the hours actually worked;
- unionized roles whose collective agreement sets wage scales and benefits;
- short-term contracts, where the rate may be set higher in place of benefits.
A salary often suits:
- steady full-time hours with little overtime, where predictable pay helps with budgeting;
- packages with strong benefits and a pension;
- management and professional career tracks, which are mostly salaried.