You may often hear the terms wage and salary used interchangeably. However, the two are very different. Some companies may prefer to pay wages, some salaries, or some may have a blend of the two.
This depends on the type of workers they employ and how their resource staff operates. If you are looking to work out the key differences, we discuss the wage vs salary dilemma in a handy guide below.
Wage Vs Salary
The key differences between a wage against a salary are that wages get calculated by the hour, whereas salaries fix into a time period. Both have both positives and negatives.
If you have a salary, it is a yearly sum. You are then paid this salary divided over the course of a year, in timed payments. For example, your salary may be $36,000 per year, and you would get $3000 every month.
A wage calculates by the hours you work. People working on wages will have a specified hourly rate. This gets multiplied by the number of hours they work in a time period, and wages are paid accordingly. For example, someone working 5 hours on a wage of $10 per hour would get $50.
Benefits of a Salary
People receiving a salary are usually professional or are in a management position. This is because the extra tasks required of them may be hard to total up in terms of hours and minutes worked. As such, it is easier to pay a base rate per period, regardless of if they exceed their stated hours or do less.
This can be a blessing and a curse. Someone on a salary may end up doing a lot more hours than they have been paid for. However, they could also be under that amount. They also have the security knowing that a set amount will be arriving into their bank accounts at designated dates.
Salaries tend to be easier to manage human resources. This is because the administrative staff knows the exact amount a person will be paid and can set this process to automate.
Benefits of a Wage
A person paid by the hour usually has the benefit of payment for any extra work they do. Most people in this position will get a base set of hours, say a 40-hour working week. They can work out their base pay rate, and add to this by working extra, overtime hours.
People paid wages may receive them with a delay. This is because the hours worked one week may get calculated the next, so payments are not as easy to predict as wage payments. Extra hours may also be mistakenly missed by administrative staff, so you could end up being paid for overtime long after you have done the work.
Which is Best for You?
Wage vs salary; which is best for you as a worker or employer is a personal preference. Salaries tend to be less work for administrative staff, but can be harder to manage financially for workers if they are paid monthly.
If you feel you need wage advice or bookkeeping services for your business, then contact us today. We can provide a range of accountancy services, meaning you can concentrate on the top priority of running your business. Stop by for a quote today!