The term hourly employee refers to workers that employers compensate using a combination of actual time worked and a predefined rate of pay. The total compensation an hourly employee makes in a single workweek will depend on the total number of hours worked.
Also known as an hourly worker, hourly employees are paid for the actual time they work. Unlike a salaried employee, that is paid a fixed dollar amount each week, an hourly employee's weekly salary is a function of the total number of hours they work in a week.
Workers that are paid on an hourly basis normally hold entry level jobs or are blue collar workers performing manual labor. For example, hourly workers are commonly found in the manufacturing sector of the economy.
The mechanism for compensating an employee (hourly or salaried) is one of several tests that determine if the employee is exempt or non-exempt under the Fair Labor Standards Act (FLSA). Salaried employees making in excess of $455 per week are always exempt, while hourly employees can be non-exempt if their responsibilities and pay scale pass the remaining FLSA tests.
The benefits package an hourly worker receives will be dictated by company policy. For example, holiday pay, floating holidays, and paid sick time are frequently negotiated as part of a collective bargaining agreement. Finally, if the hourly employee is also a non-exempt employee under the FLSA, they are entitled to overtime pay at not less than 1.5 times their hourly rate of pay when they work in excess of 40 hours in a single workweek.