Salary vs Wages

Publication Date :

24 Apr, 2020

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Table Of Contents

Difference Between Salary and Wages

A salary is a form of payment given by an employer to the employee for the services rendered by the employee, it can be dependent on an employment contract or a predefined amount, and wages are somewhat different from the salary, where wages are paid as compensation to work for any organization for a specific period.

Difference Between Salary and Wages

What is Salary?

From the definitive perspective, salary is the cost of acquiring or retaining human resources that the organization deploys for running the business.
From the accounting perspective, salary is an expense to the company and is recorded monthly or weekly in the payroll account.
A salary is generally offered to white-collar employees like Managers, Directors, or highly skilled and licensed professionals. The amount is dependent on the skillsets they offer and what value they add to the organization.
Salary also acts as a benchmark for the market to compare the competitiveness and demand in the job market. Generally, people in a similar region operating in the same geographic boundaries tend to earn an amount within a specified range.
Large corporations have salaries linked to the level of position and pre-defined hierarchy in the company. Also, the time served by the employee in the company matters to fix their salary.
For example, in the United States, the salary range is highly influenced by market forces. In Japan, seniority, the structure of the society, and the ongoing tradition play a major role in deciding on the range.

What are Wages?

Wages are generally paid depending on the amount of time worked; mostly, it is hourly, hence the term hourly worker.
The type of job paid hourly or wage driven is unskilled and lower level; jobs like a security guard, parking garage guard, librarian, and so on are paid on an hourly basis depending on the hours they clock in.
Several hours worked are specifically recorded in a timesheet that records the IN time and OUT time for every individual employee; this sheet acts as a record to calculate the worker's pay at the end of the week.
Overtime wage is an added feature that the employee gets if they tick in more hours than defined in the employment contract. The number of extra hours must be paid accordingly by the employer.
The government decides the minimum wage rate, like in the United States. The minimum hourly rate is $12, which binds the employee to pay at least $12 to every employee regardless of the skill set.

Salary vs. Wages Infographics

Key Differences

The terms salary and wage serve the same purpose of paying the employee, but there are some key differences we should discuss.

A Salary is a fixed amount to be paid and can be changed yearly or semi-annually and evenly distributed throughout the year. At times employees are also entitled to receive a year-end bonus, which is also decided based on the salary. At the same time, wages are very short-sighted, where the amount is decided weekly, bi-weekly, or annually and can be changed fortnightly as per the requirement. The number of hours decides the amount worked in that particular period.
White-collar employees like managers or directors have a fixed remuneration. They are not entitled to receive any extra amount for overtime and draw a fixed salary every month. At the same time, wages are generally given to blue-collared employees where overtime is a factor to be considered while deciding on the end-of-week pay.
The concept of a timesheet is not associated with white-collar employees earning a salary; the blue-collar employees use it to record the number of hours worked.

Salary vs. Wages Comparative Table

Differences	Salary	Wages
Skills Required	High skill set, Licensed Professionals such as lawyers, doctors also termed as white-collared employees.	Unskilled or semi-skilled workers, often known as Blue collared employees.
Cost structure	Paid at a fixed rate	Rate is variable
Frequency of payment	Monthly at a predetermined annual amount, which is equally distributed in 12 months throughout the year.	Daily or weekly, depending upon the employment.
Basis of Payment	A fixed amount is paid as decided, and the variable factor depends on the performance.	The hourly rate is decided as per the industry trends.
Recipients	Salaried workers are generally referred to as employees.	Waged workers are referred to as Labor.
Nature/Type of jobs	Office and administrative jobs	Manufacturing or process-related work;
Performance review	Most salaried guys have their performance reviewed at periodic intervals, which decide on their increment of salary.	No performance review system here; labor works correctly on an hourly rate basis.
Duration	Salary once decided stays the same throughout the year.	The wage rate can change any time, and it can be effective as per the prevailing rate.
Resignation	A salaried class generally has a notice period to serve, which will allow the employer to find the replacement with the same skill set.	There is no such thing as a notice period here since the labor worker is easily replaceable.
Purpose	In exchange for salary an individual is expected to increase the revenue of the firm directly or indirectly	Wage workers don’t need to generate any revenue; they just need to get the work done.
Leaves	A salaried worker has a predefined schedule of the paid leaves.	A wage worker has no such schedule, and every day off is a day without any wage.
Examples of profession	Doctors, Lawyers, Bankers	Construction workers, Bus driver, Delivery services, Carpenter, Welder, Electrician

Conclusion

Salary and wages are a type of compensation paid to the employees for the kind of services they offer to the company. At the same time, the types of employment for both are very different. Also, the skill set required varies a lot.