Wage Vs Salary - What are the Differences?

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You’ve definitely heard people talking about wages and salaries, and you’ve probably even heard people using the two words interchangeably. But are wage and salary the same thing, or are there differences between them?  

In this article, we’ll go into detail on exactly what these two things are, how they’re similar and how they’re different. On receiving your pay check you will be able to see clearly all the mandatory deductions from your pay. You can generate these pay checks online very easily using our online check stub maker.Whether you’re paid a wage or a salary, it’s important to understand the two things properly, so read on!

Also read: How Does 2 Week Pay Work?

Table Of Contents
 

 

What Are Wages And Salaries?

The major difference between a wage and a salary is that, if you earn a wage, you’ll be paid a certain amount per hour. If you earn a salary, you’ll earn a set amount per pay period. A pay period is usually a month, but can sometimes be different. If you are not being paid monthly, it’s likely that you’ll be paid every two weeks. 

Jobs where the employee earns a salary are usually jobs that are more focused on tasks, projects, and outcomes than on just the amount of time worked. This is why salaried employees don’t (usually) earn more or less depending on the amount of hours they work.  

For example, if you’re a project manager (a salaried position), you’re being paid to make sure that the project is completed successfully, however long that takes. On the other hand, if you’re a waiter (and therefore earning a wage), you’re being paid to be present at the workplace and serve whoever comes in. There’s no overall outcome that needs to be achieved here, so you can leave when you’ve worked your set hours.

Also read: Payroll Codes

man holding his hands up

 

Wage Example Situation

Let’s see how this works with some examples. Imagine that you earn a wage of $15 per hour and work for 8 hours per day, 5 days per week. This would mean that you’d earn $120 (15 x 8) per day and $600 (120 x 5) per week. If we assume a month of 28 days (4 weeks), you’d be earning $2400 (600 x 4) per month. However, this could change if you work more or fewer hours. Imagine if you do 7 hours of overtime during that month, paid at the same rate. You’d earn an extra $105 (15 x 7) for this, taking your monthly earnings to $2505 (2400 + 105).  

However, in some jobs that pay a wage, overtime work is paid at a higher rate than normal work. In particular, if your overtime means that you’re working more than 40 hours in a week, then you are entitled to a pay rate of 1.5 for all the overtime work beyond 40 hours. 1.5 means that you’ll be earning your usual rate of pay, plus an extra 50%.

In our example, this would mean that anything beyond the basic 40 hours per day is paid at the rate of $22.50 per hour, rather than $15. If you do those 7 hours of overtime at this new, higher rate, you’ll earn an extra $157.5 (22.5 x 7), making your overall earning for the month $2557.50 (2400 + 157.5). Note that overtime work is not always paid at a higher rate - if you usually work only 35 hours in a week, then the first 5 hours of overtime you work will typically be paid at your usual hourly rate. Anything beyond that will be paid at the 1.5 rate.

Also read: Working On Payroll Jobs

 

Salary Example Situation

If you earn a salary, things are different. You will be paid a set amount for your work, so for example, your monthly salary might be $3000. If you’re earning a salary, it’s typically expected that you will do some overtime without any extra pay, although the amount of overtime that’s expected for employees earning a salary can vary hugely between different companies. This does also mean that if you work fewer hours than expected, you won’t earn any less money, either.  

people on their laptops

 

Speed Of Payment

There is also a difference between wages and salaries when it comes to how quickly you’ll be paid. If you earn a salary, you will generally be paid on the same day each month (e.g, the last day of the month, or the last Friday of the month etc.) This is to say that you’ll be paid through and including the pay date. This is simple to arrange because you’re earning a fixed rate, meaning that payroll staff don’t have to do much to calculate your rate of pay.  

Things are usually different if you’re earning a wage. The way it’s usually done for wage earners is that you will be paid through a date that is earlier than the pay date, so as to give the payroll team enough time to correctly calculate the pay for all the wage-earning employees, which could be different for everyone due to different numbers of hours worked.  

If you work during the time when the paycheck is being calculated, but before it is paid, the money for those hours will be paid to you in the next paycheck. For example, if you receive your pay on Friday but the cutoff day is Tuesday, any money you earn from working on Wednesday and Thursday will not be paid to you on Friday but in the next paycheck after that. This can be a bit of a shock if you’re expecting and counting on that money, so it’s good to be aware of this practice so you can plan around it.

Also read: What Are Employment Verification And Proof Of Income Documents?

 

Which Is Better: Wage Or Salary?

It’s not really possible to say that either a wage or a salary is better than the other, as each has their own advantages and disadvantages. As we’ve mentioned before, people earning a salary will earn the same amount no matter how many hours they work. The problem here is that they (probably) won’t get paid any extra for overtime, though this also has the benefit of meaning that they won’t earn less for working less either. Salary earners also often earn pay in other ways.  

For example, while you might not earn any extra for staying late all week to finish a project, you might get paid a bonus for finishing the project ahead of schedule. If you’re in sales, you’ll get paid commission for each sale, so if you’re putting in extra time to close a deal, you can be rewarded this way instead.

If you’re earning a wage, then you have the advantage of being able to be paid extra for any additional work you do, and often at a higher rate as well. On the other hand, working less will also mean you’re paid less. Wage-earning positions sometimes also offer other bonuses, but it is less common than in salaried positions.

Which of these is better depends on individual circumstances and preferences.

Also read: 12 Ways Payroll Data Can Help Your Small Business Save Money

people looking at a sheet of paper

Final Thoughts

So, now you know the major differences between earning a wage and earning a salary. Each way of getting paid comes with its own advantages and disadvantages, but they’re both ways of earning the money you need to support yourself. As long as you keep the differences in mind and plan around them, you should have no problem being paid either a wage or a salary.   

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Wage Vs Salary - What are the Differences?
James Wilson

After graduating from McCombs School of Business in Texas, James joined ThePayStubs as a CPA to make sure the numbers we provide our clients are corre... Read More

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