An easy explanation: salary vs wage

Do you ever get confused between a salary and wage? And no, we are not speaking about the green, leafy vegetable; that would be celery. Instead, salary is a negotiated, fixed amount of money paid to an employee at fixed intervals. Alternatively, a wage is contingent on the hours worked over the pay period, thus may be subject to change. Business Kitz has put together this handy blog to explain this in more detail!

What is a salary?

A salary is a negotiated, fixed amount an employee receives each pay period. As this is a fixed amount, it does not change if the employee works overtime. However, it includes a number of employment benefits, including paid leave, superannuation, sick leave and potentially bonuses. This fixed amount is generally calculated on an annual basis but is paid in consistent intervals. The relevant pay period should be stipulated in the employment agreement, but is generally a weekly, fortnightly or monthly interval. Business Kitz has high-quality employment agreement templates available for full-time, part-time and casual employees, for reference.

Although the pay package is fixed, there may be opportunities for pay rises or promotions to be negotiated. 

What is a wage? 

A wage is paid to an employee at the end of each pay period for the hours they worked. Therefore, there is no fixed amount paid per annum, as their payment is contingent upon the hours worked, thus may be subject to change. The employee is paid an hourly rate, as stipulated in their employment agreement, but this may alter when penalty rates and overtime are applicable. The award the business falls under will determine which penalty rates (weekends, public holidays, late hours, etc.) the employee may be entitled to. 

What are the key differences between a wage and salary? 

A salary is a fixed payment received for each pay period, compared to a wage that is flexible and contingent on the number of hours worked in each pay period. 

What are the benefits associated with each? 

A salary implies greater employment security and income stability. It includes benefits like superannuation, sick leave, paid leave and bonuses. But, there are no extra payments made for overtime, unlike wages. Wages may be beneficial for someone who prefers flexibility, however they do not include the aforementioned security benefits of a salary. 

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Legal Advice 

We hope this post made the differences between wages and a salary a bit more clear. If you still have questions, please reach out to our sister company, Legal Kitz, for further advice. They specialise in employment-related matters and offer a FREE 30-minute consultation to assist with any of your queries. Additionally, our subscription plan offers employers access to over 150+ legally compliant, employment, and HR-related document templates to take away the hassle regarding the legalities of being an employer. Click here to find out more about our subscription plan.

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