Definition of Gross Salary and Wages

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Many people use the terms "salary" and "wages" interchangeably and are not sure of the difference when an employer offers them a salary or wages. Both refer to proper remuneration for your services. However, while a salary is a fixed amount usually defined through an employment contract, wages refers to an hourly rate for your services.

Salary

Employees who are paid a salary receive a fixed gross amount each pay period. The yearly gross amount is equal to the amount of the salary specified in the employment contract. For example, a person who has a yearly salary of $48,000 will receive a gross salary of $4,000 each month. The amount of the salary is not dependent on the number of hours you have contributed each month.

Wages

Unlike the fixed annual income of a salary, wages are calculated on an hourly rate. The yearly gross wage is thus dependent on the number of hours you worked at your place of employment. For example, a person who is offered a wage of $10 an hour will receive a weekly gross pay of $400 based on a 40-hour week. However, in this case, the employee's wages will reflect the hours he worked during a given pay period, meaning if he works fewer hours, he will be paid less.

Payments

The pay check of salaried officials usually covers the dates up to and including the pay date. For example, an employee who receives his salary on the last day of each month will be paid for the entire month because he receives a fixed salary and no adjustments are required. In contrast, the wages owed to an employee will need to be calculated by the payroll staff according to the hours worked during each pay period. For this reason, employees who receive wages are usually paid for the preceding pay period. For example, the wages received in the month of February will cover the hours worked during the month of January.

Gross and Net Income

When calculating either your gross salary or gross wages, the amount refers to the total amount of money you earn, including bonuses, allowances, commissions and any other benefits prior to your tax deductions, national insurance contributions and other contributions. On the other hand, your net income is your take-home pay after taxes and contributions are deducted.

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