written by | August 2, 2022

What Is the Difference Between Salaries and Wages?

×

Table of Content


People frequently mistake and confuse the words salary and wages. However, the reality is that these two phrases are not interchangeable and have distinct meanings. Wages and salary differ primarily as salaries are constant, meaning the company and employee determine and agree on a fixed amount before starting the job. Still, wages vary on the number of hours an employee spends working.

Did you know? Salary is typically paid at regular periods, such as once each month. In contrast, wages are paid daily according to the number of hours worked. Salary is given based on an individual's performance. While wages are paid hourly or according to the number of hours worked. 

The Definition of Salary

Let us first understand the definition of salary. The amount on which both the company and the employee agree, paid to the employee on a regular interval depending on the person's performance, is referred to as salary. Salary is usually a fixed sum of money that the company determines annually. 

The sum which the company has to distribute monthly is calculated by dividing it by the period of months. The employee receives the same depending on his performance. The employee needs to work for a specific number of hours each day. However, if the person cannot complete the task within the time given, the person may have to work longer hours without earning extra money. 

The employees are eligible for vacation, rewards, and perks, meaning that if they take a leave of absence, the company still pays them their payment for that day. Salaried people are typically described as working in "white-collar office jobs," which suggests that they are well-educated, competent, hired by a company, and occupy a respectable social standing.

Also Read: Salary Revision in Jobs and Recovery of Arrears

The Definition of Wages

Now, let us learn the definition of wages. Wage is the amount an employer pays to an individual depending on the work they have completed and the total hours spent on that job. Wages are flexible and do change depending on how individual functions daily. Workers hired by the production industries receive wages and daily remuneration. 

A worker is compensated according to the number of hours they work for. It means working for more hours will result in a higher wage. An employer pays the worker for their attendance but not for their absence. Therefore if they don't show up for work on any day, then they will not be getting any wage for that specific day. When someone is getting wages, they are referred to as working a "blue-collar labour job," which suggests that they do an unsophisticated or semi-skilled task and receive daily pay.

Difference Between Wages And Salary 

Below is the comparative table for wages and salary:

Differences

Salary

Wages

Skills Required

Strong professional skills, Licenced white-collar workers, which include experts like teachers and doctors.

Labourers with low or intermediate skill levels are also referred to as blue-collar workers.

Cost Structure

They receive salaries at a fixed rate.

The wage rate is erratic

Occurrence of Payment

They receive a fixed amount every month, which is equally divided between all the twelve months.

According to the job, they receive wages daily or hourly.

Basis of Payment:

They receive a fixed amount already agreed upon, while the variable component is dependent on the output.

The supervisor decides the hourly amount in accordance with market trends.

Recipients

Employees are salaried personnel.

Labour is the term used to describe waged workers.

Nature\ Type of job

Positions in the office and administration.

Work involving a procedure or manufacturing.

Performance Review

The majority of employees who are getting payment undergo frequent performance reviews, determining whether they will receive a pay raise.

There is no quality evaluation system in place here. Labourers will be getting the hourly payment as usual.

Duration

Once a company decides, salary remains constant year-round.

The wage rates may vary at whatever time and bring effect in accordance with the going rate.

Resignation

An employee must give a written notice of resignation and serve their notice period. This gives the employer to recruit a replacement.   

Since a labourer is easy to replace, there's really no such thing as a period of notice in this situation.

Purpose

An employer expects that employees must directly or indirectly boost the company's income in return for a salary.

Wage-earners only have to complete their tasks. They do not need to create any income for the employer.

Leaves

A full-time employee has a fixed timetable for paid vacation days.

Such a timetable is not available to wage workers, and each day off results in a loss of pay.

Examples of professions

Engineers, doctors, teachers and bankers.

Construction personnel,  taxi drivers, plumber, painter, blacksmiths, and courier servicemen. 

Also Read: Salary Calculator 2022-23 - Take Home Salary Calculator India

The Advantages of Salary

The following are some benefits of paying salaries that apply to both the management and employees:

  •  Consistency in Pay Calculation

Employees are at an advantage as they will receive fair compensation for their job. The accounting divisions will also profit from this uniformity because they can grant all cheques at about the same time monthly for similar amounts. This clears up any confusion and guarantees stability for financial requirements.

  •  Compensation Reflecting Responsibility 

Salaried employees have more responsibilities than hourly workers. They occasionally need to work extra on weekends and non-standard hours. They frequently receive more compensation as a result. Both the employee and the company profit from the higher salary and the increased competition for employment.

  •  Perks and Benefits

Salaried employees can negotiate with companies for vacation time and payment or flexibility in work schedules. They occasionally receive benefits like working remotely, bonus pay, and medical coverage. Additionally, some firms could offer their employees housing subsidies, vacation packages, and company-owned vehicles.

 Also Read: Basic Salary in India - Explained with Calculation

The Disadvantages of Salary

The following are the disadvantages of salary:

Fixed Pay

Salaried jobs allow employees to work only for a fixed number of hours. A salaried employee has little to no opportunities to earn additional income, as the fixed working hours leave no scope for longer working hours. Therefore, the scope to work and earn more is rather non-existent for salaried employees. 

  •  On-Call

Some workers work odd hours or are available for lengthy periods. Employees may feel anxious as a result. Irrespective of their pay, employers only select workers who can handle the needs of the company. Employers may not necessarily pay additional money or other compensation for working at odd hours. Besides, employees may not be able to choose their work hours. Employers may also have issues if poor work-life balancing results in employee attrition or ill health.

The Advantages of Wages

Below are some benefits of wages for both people and businesses:

  •  Pay Reflects Hours Worked

Employees get wages for their working time since hourly earnings are closely correlated to the number of working hours. This is vital for firms that have a sizable part-time staff since it helps both workers and the management. Overtime compensation is a way of rewarding those who invest more time than is necessary for full-time employment; this may later enable workers to work flexibly.

  •  Less Work Responsibility

Fewer work duties and obligations are advantageous for workers who get paid on an hourly basis. Usually, employers think that hourly workers can fulfil their tasks at an hourly rate. This works effectively for firms that might need a sizable part-time or intermediate-skill staff.

  •  No Contracts

Contracts don’t bind hourly workers to remain with a firm at all times. When they choose to, individuals can change jobs. Workers who work in risky industries greatly benefit from this flexibility.

The Disadvantages of Wages

The major disadvantages of wages are mentioned below:

  •  Hours Worked and Pay Cuts

Waged employees’ pay depends on the number of hours they work. This could be advantageous in certain ways, but it could also work against you when you are not in a condition to work as many hours to earn a living. Because hourly workers typically don't work regular hours. Organisations may decide to reduce their hourly workforce. The opportunity to reduce hours is really advantageous for failing businesses. The ideal situation for a company with waged employees is to compensate for the hours necessary to meet minimal operating needs.

  •  Low on Benefits

The perks that salary employees receive may not be applicable for workers who work on daily wages. This comprises paid time off, vacation pay, pension schemes, insurance plans, and travel reimbursements. The employees may suffer as a result of this. This is one of the reasons why some businesse favour employing workers on an hourly wage.

Conclusion:

It is clear that, while wages are variable cash payments to individuals depending on the number of working hours, salaries are a constant sum of money that companies pay to individuals regularly for the job they perform. We hope you understand the salary and wage difference now.
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: Name some wage professions.

Ans:

Construction workers, plumbers, painters, etc.

Q: Name some salary professions?

Ans:

Doctors, teachers, engineers, etc

Q: How does a company decide on employee pay raises?

Ans:

Depending on the employee's overall performance, a compensation strategy will determine the employee's annual increment.

Q: What is the key difference between wages and salary?

Ans:

Unlike wages, which can change depending on the state of the market, salaries are fixed amounts.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
×

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.