The table below shows the typical hours worked by employees at a company. A new employee is offered an annual salary of $37,000. Hourly employees get paid $14 per hour, but get $21 per hour for each hour over 40 hours. Should the new employee choose the salaried or hourly pay? Explain your reasoning.
Answer (2)
The new employee should choose the salaried pay of $37,000, as it is greater than the estimated annual pay from hourly work, which totals $35,672. This comparison shows that the salaried pay is the better option financially. Therefore, the salaried pay is the preferable choice.
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Calculate the total weekly hours: 0 + 8.5 + 9.5 + 7.5 + 8 + 8.5 + 4 = 46 hours.
Calculate the weekly pay: $14 \times 40 + 21 \times (46 - 40) = 560 + 126 = $686.
Calculate the annual pay: $686 \times 52 = $35672.
Compare the annual pay with the salary: Since 35672 < 37000 , the employee should choose the salaried pay .
Explanation
Analyzing the Problem First, let's analyze the problem. We need to determine whether a new employee should choose a salaried pay of $37,000 or an hourly pay based on their typical weekly hours. The hourly pay is $14 per hour for the first 40 hours and $21 for each hour over 40. We have the employee's typical hours for each day of the week.
Calculating Total Weekly Hours Next, we need to calculate the total hours worked in a week. From the table, the hours are: Sun: 0, Mon: 8.5, Tues: 9.5, Wed: 7.5, Thurs: 8, Fri: 8.5, Sat: 4. Adding these up, we get: 0 + 8.5 + 9.5 + 7.5 + 8 + 8.5 + 4 = 46 So the employee works 46 hours per week.
Calculating Weekly Pay Now, we calculate the weekly pay based on the hourly rate. Since the employee works 46 hours, they get paid $14 per hour for the first 40 hours and $21 for the remaining 6 hours. The weekly pay is: 14 × 40 + 21 × ( 46 − 40 ) = 14 × 40 + 21 × 6 = 560 + 126 = 686 So the weekly pay is $686.
Calculating Annual Pay To find the annual pay, we multiply the weekly pay by the number of weeks in a year, which is 52: 686 × 52 = 35672 So the annual pay based on the hourly rate is $35,672.
Comparing Annual Pay and Salary Finally, we compare the annual pay with the salary of $37,000. Since $35,672 < $37,000, the employee should choose the salaried pay. The salaried pay is higher than the annual pay based on the hourly rate.
Conclusion The new employee should choose the salaried pay because the annual pay based on the hourly rate ($35,672) is less than the offered salary ($37,000).
Examples
Understanding the difference between hourly and salaried pay is crucial in the real world. For example, if you are offered a job with an annual salary, you can calculate your equivalent hourly rate by dividing the salary by the number of working hours in a year (typically 2080 hours). Conversely, if you are offered an hourly rate, you can estimate your annual income by multiplying the hourly rate by the number of hours you expect to work in a year. This comparison helps you make informed decisions about job offers and manage your finances effectively. In this case, the calculations showed that the salaried option was more beneficial for the employee.
