Hourly Rate

Posted in Human Resource Terms, Total Reads: 197

Definition: Hourly Rate

Hourly rate is defined as the payment done to an employee, worker or an individual on an hourly basis, depending on the number of hours of done. This could be defined as the money charged, or earned for putting in certain hours of work for the concerned organization, and getting that amount in order to support the lifestyle you desire.

“This is calculated by making use of desired annual profit, the costs incurred, the number of billable hours put in & the holidays expected”.

There are two ways of looking into it,

1. Paying a person according to the hours that the person has worked for. This is generally seen for the non-managerial employees.

2. You could pay for the time that the person has put in, rather than the products sold. (Eg. Service Sector, Consultants, etc.)


1. The hourly pay employees earn significantly low than the regular employees, thus the jobs could be easily accomplished at a much lower cost.

2. The perks & benefits available to hourly pay employees is also lesser. This enables them to make offerings to retain their staffs, employees & cut down on the costs if attrition happens.


1. Even the costs paid to hourly employees are lower, there is the risk of the talented pool being taken away by competitors.

2. Consistent attrition of operational workforce may result as a headache for the company, with continuous recruitment & training them.

Example: The daily labor pool in die-making companies is paid $25/hour. The companies may save on the labor costs, at the risk of some of the talented employees being hired by competitors and affecting your company’s fortunes.

The hourly pay factor is thus considered in case of designing the base pay mechanism, the benefits package & so on.



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