Salary
A salary is a fixed amount paid to an employee over a 12-month period. An employee usually receives their salary on a monthly basis or any other period agreed in the employment agreement. So, if your salary were $72,000 after tax per annum, every month you would receive $6,000.
The number of hours you work has no impact on your salary. This means that if you had to work well over 40 hours per week one month and got to leave work early a few days the next, there would be no difference to your pay. This is obviously subject to you meeting your monthly goals and satisfying your work requirements.
Wage
Wages are paid on an hourly rate and depend on how many hours the employee works in a given pay period. The pay period is usually one or two weeks and there is no fixed amount per annum. This means if you worked overtime one week and missed a shift the next week your pay will reflect the changes. If you were paid $20 an hour and you worked 25 hours one week and 30 the next, your pay for the first week would be $500 and $600 the next. You would still have to fulfill the requirements of your role, but your pay is dependant on the number of hours you work.
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The Difference Between Salary and Wages
The most obvious difference between salaries and wages is that with a salary you know how much you will receive per year. Whereas with wages, it all depends on how much you work. The other major difference is that employees receiving wages can earn wages for overtime, at a special overtime rate. Under a salary, the number of overtime hours you put in is irrelevant to your pay.
The pay period for a salary includes the date of payment. This is because paying a salary is very simple. All the employer has to do is ensure the employee receives the correct salary after tax and other deductions.
With wages, the pay period does not include the date of payment. It will cover the number of hours the employee has worked in the previous week or weeks. This is because the employer has to calculate the number of hours the employee has worked in the week(s) and any overtime hours and calculate the pay accordingly for each pay period.
Is One Better Than The Other?
Salary
A salary is more secure and predictable. You know beforehand how much you will receive and it is easy to plan your financial commitments for the month beforehand. A salary also comes with benefits like superannuation, sick leave, paid leave, bonuses and fringe benefits. It is also easier to negotiate your salary with your employer and there is potential for pay raises and promotions.
The main disadvantage of a salary is that there no pay for overtime; your performance at work is more important. This means that the long hours an employee puts in could go unrecognised, especially if they did not reach their goal. This could then lead to some extra pressure and stress at work.
Wages
Wages offer more flexibility for an employee. They have the option to work overtime and receive pay at the overtime rate. Arguably, this is a more stress-free environment for employees because they know their time is being valued.
The disadvantage of receiving wages is that they do not come with the security and benefits of a salary. There is no guarantee you will make the same amount every pay period. You could lose shifts or be called in for shorter hours if the business is struggling. Therefore, you may not always be able to work overtime and earn extra income.
Final Thoughts
One is not better than the other simply because they both offer something different. Getting paid wages might be more attractive to a young adult looking to make some money while still studying. Whereas a graduate would really appreciate a job with a good salary and the benefits it comes with.
If you, however, have any questions about your receiving pay or other employment matters, you should speak with an employment lawyer who will be able to give you personalised advice.
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