Distinguishing between salary and wages will come easy after reading this post. So, ensure you read every detail to the last paragraph.
As a Nigerian, which do you hear often, salary or wages? You can give your response in the comment section and other things you would like to know regarding the explanation we are about to give.
Distinguishing Between Salary and Wages
Let’s start by defining what salary is.
What is Salary?
When it’s towards month end you often hear people say “salary week is here!”. You shall soon find out what that means.
A salary is defined as a fixed, regular payment to an employee for their work or services performed over a specific period of time. A salary can be paid bi-weekly, but the commonest one is paid monthly. Salary includes bonuses or incentives, overtime pay, allowances, and basic pay.
However some organisations could exclude compensations on bonuses and overtime depending on the employment contract binding their employees. Salaries can be grouped into gross salary ( which represents payment before taxes and deductions); Net salary (payment after taxes and deductions); and total compensation (benefits and perks inclusive).
What is Wages?
Wages are monetary compensation paid to people for their labour, skills, or services. It is often paid on an hourly or daily rate; it could also be paid based on each work provided. Wages are dependent on factors such as the number of hours worked, output provided and productivity level.
Wages can also include shift premiums, commissions, piecework rates, overtime pay, and hourly rate. However, when someone talks about wages, they could also be referring to the way they are classified.
Wages are primarily classified into minimum wage, union wage, living wage, and prevailing wage.
What is Salary and Wages Administration?
Salary and Wages Administration is simply the systematic process Involved to properly manage and regulate an organisation’s compensation structure. This is carried out so that employees can enjoy fair, equitable, and a system of compensation which is compliant to the mandated process and payment of salaries and wages.
This is done to attract and retain top talent into the workforce; manage labour costs and budget; motivate and engage employees; minimise disputes and litigation; and also maintain compliance with regulatory requirements.
Differences Between Salary and Wages
From our definition of salary and wages, it is now easy to distinguish between salary and wages. Salary and wages are different and clearly distinguished in compensation, calculation, payment frequency, and benefits. For instance, salaries are fixed; they are regular payments which can occur bi-weekly or monthly.
They are annual compensation divided into equal installments; paid regardless of hours worked; may include bonuses or incentives; often include benefits such as health insurance and retirement plans.
Wages, on the other hand, are variable payment based on the number of hours an employee put into work; they are paid to non-exempt employees (hourly workers), unlike salaries which are paid to exempt employees; wages are based on hourly, daily, or piecework rates; they may include overtime pay; wages offer fewer benefits when compared to salary earners.
In addition to that, those who earn wages are paid for the actual time they commit on the job.
In conclusion, salaries are structured in a way that emphasizes job responsibilities and performance, while wages give priority to the level of output or productivity, as well as number of hours worked.
