Difference between Salary and Wages17/08/2020
The term salary and wages is often confused by people and is used interchangeably. But the truth is that both these terms differ from each other and hold different meanings. Salary is a fixed amount paid or transferred to the employees at regular intervals for their performance and productivity, at the end of the month whereas wages are hourly or daily-based payment given to the labour for the amount of work finished in a day.
The main difference between salary and wages lies in the fact that salary is fixed, i.e. it is predetermined and agreed between the employer and employee, while wages are not fixed, as it varies depending on the performance of the labour.
The term salary is the agreed upon amount of money between the employer and the employee that is extended at regular intervals on the basis of an individual’s performance. Salary is generally a fixed amount of package calculated on an annual basis. When divided by a number of months the amount to be disbursed monthly is ascertained. The same is given to the employee on the basis of his productivity.
An employee is supposed to work for certain fixed hours daily but if Sometimes the work is not finished in time the employee has to devote his extra time without any additional pay. An employee is entitled to leaves, perks, and benefits, i.e. salary will be given if an employee has availed a leave and didn’t turn up for the work.
Salaried persons are generally said to be doing “white collar office jobs” which implies that an individual is well educated, skilled and is employed with some firm and holds a good position in the society.
Wage is termed as a compensation that is given on the basis of the amount of work done and the hours spent in doing that. Wages are variable and do vary with day to day functioning of an individual. Wages are given to labours who are engaged in manufacturing processes and get the compensation on a daily basis.
Labour is paid on the basis of hours and in order to increase the pay, extra hours have to be devoted to fetch more. An individual is paid for his presence, not for his absence i.e. in case a person do not come for the work he will not be paid for that day.
The waged person are said to be doing “blue collar labour job” which implies that an individual is engaged in the unskilled or semi-skilled job and is drawing wages on a daily basis.
|Meaning||A fixed pay that an individual draws for the work done by him on an annual basis.||A variable pay that an individual draws on the basis of hours spent in completing the certain amount of work.|
|Skills||Skilled personnel||Semi-skilled or unskilled|
|Type of cost||Fixed||Variable|
|Rate of payment||Fixed rate||Wage rate|
|Basis of payment||Performance basis||Hourly basis|
|Paid to whom||Employees||Labor|
|Nature of work||Administrative-office work||Manufacturing-process work|
|KRA (Key resultant area)||Yes||No|
|Extra pay for extra hours||No||Yes|
Following are the major differences between salary and wages:
- Salary is the fixed amount of compensation which is paid for the performance of an employee. Wage is the variable amount of compensation which is paid on the basis of hours spent in finishing a certain amount of work.
- Salary is given to the skilled persons who apply their proficiencies in respective fields and generate the revenues for the firm. Whereas wages are paid to the semi-skilled or unskilled worker such as carpenter, welder, electrician, etc. who work on hourly basis.
- In the case of salary, the cost incurred is fixed i.e. fixed amount is paid monthly. Whereas in wages, the cost is variable, because it can vary with the day to day performance of an individual.
- Salary once decided, in the beginning, remains fixed throughout. Whereas in wage system, there is a wage rate that keeps on changing and an individual is paid on the basis of prevailing wage rate.
- Salary is generally paid at fixed intervals i.e. monthly. Whereas wages are paid on a daily basis for the number of hours spent.
- Salary is paid on the basis of the performance of an individual. Whereas wages are paid on hourly basis i.e. the amount of work done in hours.
- Salary is paid to employees who possess the skills and efficiencies in completing the office work. Whereas wages are paid to the labours, who are engaged in manufacturing processes and do the work on an hourly basis.
- Salary is given to those who are engaged in administrative or office work job. Whereas wages are paid to those, who are engaged in manufacturing processes that require unskilled or semi-skilled workers.
- A salaried person usually has KRA i.e. key resultant area set for the month on the basis of which their performance is judged. Whereas the waged person does not have any KRA and is judged on the basis of hourly work done.
- Salaried persons are not paid additional compensation for any extra hours. Whereas wage holder does get an additional pay for the extra hours devoted by him.
- It can be easily concluded from the above comparison that salary is a fixed amount of money paid at a regular intervals to an individual for the work done by him in given period of time whereas wage is a variable pay given to an individual for the number of hours spent by him in completing a certain amount of work.