Entrepreneurship and Small Business (ESB) Certification Practice Exam

What type of employees receive a fixed amount each pay period?

1. Hourly employees

2. Contractors

3. Salary employees

4. Commission-based employees

The correct answer is: Salary employees

The correct choice is salary employees, as these individuals receive a consistent and predetermined amount of pay each pay period, regardless of the number of hours worked or the output produced. This payment structure means that salary employees have a guaranteed income which can provide financial stability and predictability. Typically, their compensation is expressed as an annual income, divided into regular pay periods, such as bi-weekly or monthly. In contrast, hourly employees are compensated based on the number of hours worked, which can fluctuate from week to week. Contractors usually receive pay based on project completion or hours worked, which means their income can vary significantly. Commission-based employees earn money primarily through sales made, leading to variable pay based on performance, rather than a fixed amount. Thus, salary employees have a distinct compensation model characterized by its regularity and stability.