What is the salary

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What is a salary? Definition and meaning

A salary is the regular payment by an employer to an employee for employment that is expressed either monthly or annually, but is paid most commonly on a monthly basis, especially to white collar workers, managers, directors and professionals.

A salary employee or salaried employee is paid a fixed amount of money each month. Their earnings are typically supplemented with paid vacations and public holidays, healthcare insurance in country’s without universal coverage, and other benefits.

Salaries are usually determined by comparing what other people in similar positions are paid in the same region and industry. Most large employers have levels of pay rates and salary ranges which are linked to hierarchy and time served.

In most countries, salaries are also affected by supply and demand – how many job vacancies there are for a specific position in relation to the number of people that exist in the area who could fill that post.

“A fixed compensation periodically paid to a person for regular work or services.”

What determines salary rates?

Apart from supply and demand (market forces), salaries are also determined by tradition and legislation. In the United States, for example, pay levels are influenced mainly by market forces, while in Japan seniority, social structure and tradition play a greater role.

Even in nations were market forces play a dominant role, studies have shown there are still differences in how monetary compensation is arranged for work done based on gender or race – men tend to earn more than women and white employees’ average incomes are overall higher than those of other ethnic groups.

In 2007, the US Bureau of Labor Statistics reported that women of all races earned 80% of the median wage of their male counterparts. Although the gender gap has closed slightly since then, total equality will probably not be reached for at least another five decades, experts believe.

Difference between salary and wage

The terms salary and wages are commonly interchangeable, and in many contexts their meanings are the same – but not always.

A salary does not change on a weekly or monthly basis. Salaries are calculated annually, divided by twelve and paid out each month. In some countries people are paid double in December, in such cases their annual salary is divided by thirteen, with two months’ pay included in their December’s paycheck.

Wages, on the other hand, are calculated on the number of hours worked that week, fortnight or month. Employers pay wages either weekly, fortnightly or monthly, and are linked to how many hours the employee worked. This is not the case with salaries – a salaried employee’s monthly income is always the same.

Managers, for example, are always paid a salary – never wages. Their monthly pay check does not change if they do overtime. Production-line employees and other blue-collar workers are usually paid overtime – their ‘wage’ varies according to how many hours they put in that week or month.

Salary employees do not need to keep track of their hours in the way hourly workers do – there is no need for them to sign a time sheet.

Workers on wages are typically paid time-and-one-half for every hour of overtime work. At weekends and public holidays some employers may even pay double time. I remember when I was a student I once worked at a gas (UK: petrol) station on Christmas Day and was paid quadruple time.

‘Sal’ in Latin means ‘Salt’, and ‘Salarium’ was a ‘salt payment’. That was how Roman soldiers got paid and how many Romans traded. Salt has been used across the world for thousands of years as a type of currency to buy things and pay for services.

Pros and cons of a salary vs. wage

Perhaps the main disadvantage of being paid a salary is that in most cases you are not able to earn overtime. This means that you often have to work extra hours for no extra pay.

In the United States, some lower-salary positions are still eligible for overtime rates, based on federal and state laws. In the UK, whether salaried personnel are paid for overtime for extra work done depends on their employment contract and any agreements the employer might have with a trade union.

It is generally harder for salaried personnel to separate home from work life than for workers on wages. Hourly employees typically find it easier to switch off completely from work-mode as soon as their working day or shift ends.

Sir Alfred Hitchcock (1899-1980), a British film director and producer, known by many as ‘The Master of Suspense,’ once said: “When an actor comes to me and wants to discuss his character, I say, ‘It’s in the script.’ If he says, ‘But what’s my motivation?,’ I say, ‘Your salary.’” (Image: Wikipedia)

The main advantage of receiving a salary is being able to plan ahead. You know exactly how much each paycheck will be for – your medium-term future is predictable. This makes it easier to decide how much you should borrow, what type of vacation you can afford for next year, what type of car to buy and when and how to purchase it, etc.

Salary employees are more likely to receive benefits, which will include paid vacations, and possibly a non-contributory pension scheme, health insurance, a company car, etc.

Which system is best for me?

In some cases you will have no choice. If you have just qualified as an accountant, all positions offered to you will be salaried.

For those who may be exposed to either a salary or wage lifestyle, which one to choose depends on what type of person you are. If you value the predictability and security of a regular paycheck, you should go for a salary position.

Steve Wozniak, an American inventor, programmer and electronics engineer, who co-founded Apple Inc., once said: “I just believe that the way that young people’s minds develop is fascinating. If you are doing something for a grade or salary or a reward, it doesn’t have as much meaning as creating something for yourself and your own life.” (Image: twitter.com/stevewoz)

If you want more extensive benefits and perks, you would be happier as a salaried employee.

However, if maintaining a clear separation between work and home life is a top priority, and you dislike the idea of having to work overtime with no extra pay, you would probably prefer an hourly position, i.e. one where you are paid a wage.

‘Compensation’ has a similar meaning to salary when talking about the monthly incomes of employees. However, compensation includes salaries/wages plus other allowances and possible perks such as subsidized meals, commuting costs, housing, company car, discounts, etc.

According to the Online Etymology Dictionary, the term ‘Salary’ meaning ‘compensation, payment’ first appeared in the English language in Britain in the late thirteenth century. It came from Anglo-French Salarie, which evolved from Old French Salaire ‘reward, pay, wages’, which originated from Latin Salarium ‘stipend, pension, salary’. Originally, the Latin term came from salt-money, a soldier’s allowance for the purchase of salt. The Latin word Sal means ‘salt’, while Salarius means ‘pertaining to salt’.

‘Salary’ in other languages: salario (Spanish, Italian, Portuguese), salaire (French), Gehalt (German), зарплата (Russian), 給料 (Japanese), 薪水 (Chinese), lön (Swedish), راتب (Arabic), वेतन (Hindi), gaji (Indonesian), and mshahara (Swahili).

What is Salary Sacrifice?

Salary Sacrifice is a mutual agreement between employer and employee and the employee needs to make a change to their employment contract. The sacrifice of cash entitlement is usually replaced in some form or non-cash benefit. The reduction in cash entitlement cannot drop below minimum wage.

Video – How to negotiate a salary

In this Howcast video, you will see some very useful tips on how to negotiate a salary during a job interview.

Разница между wage и salary, income и revenue

Когда речь заходит о зарплате и доходах, студенты обычно путаются в разнице между wage, salary и pay, не знают, чем отличается income от revenue и других синонимов. В этой статье разберем случаи употребления каждого из этих слов, приведем устойчивые выражения и дадим тест по теме.

1. Salary, wage, fees, earnings, pay

Начнем с отличий слова salary от wage. Salary — это зарплата, фиксированная сумма, которую сотрудник получает ежемесячно за свою работу. Wage или wages — это зарплата, которая рассчитывается на основе отработанных часов/дней в неделю/месяц. Разница между wage и salary заключается еще и в том, что wages применяется в отношении физического труда, а salary — умственного.

The company pays me a salary of 30 000 roubles per month. — Компания платит мне оклад в размере 30 000 рублей в месяц.
My mom is on a decent salary at the bank. — Моя мама получает достойную зарплату в банке.

Plant workers protest against low wages. — Фабричные рабочие протестуют против низкой зарплаты.
She has a part-time job and earns an hourly wage. — У нее работа с частичной занятостью, и она получает почасовую оплату.

Чем отличается fee от salary? Fee или fees — это гонорар, который платится специалисту за работу.

We can’t afford the lawyer’s fees. We’ll have to deal with that on our own. — Мы не можем оплатить гонорар адвоката. Нам придется разбираться с этим самостоятельно.

Второе значение слова fee — плата, взимаемая за оказанную услугу.

My bank collects fees on every single transaction. — Мой банк взимает плату за каждую транзакцию.

Рассмотрим еще пару синонимов: earnings и pay.

Earnings — заработок, доход.

Having got a mortgage, I found a second job to increase my earnings. — Оформив ипотеку, я нашел вторую работу, чтобы увеличить свой заработок.
Prices have risen much faster than average earnings. — Цены выросли намного быстрее, чем средний доход.

Еще одно значение слова earnings — прибыль компании.

AMC company reported that current earnings are higher than at the previous quarter. — Компания AMC сообщила, что текущая прибыль выше, чем в предыдущем квартале.

Pay — это плата за работу (наиболее общее слово).

I can’t accept the job, the pay is too low. — Я не могу согласиться на эту работу, оплата слишком низкая.

Если вы усвоили разницу между wage, salary, pay, earnings и fees, запомните устойчивые выражения с этими словами.

2. Income, revenue, living и allowance

Давайте рассмотрим, в чем заключается разница между income и revenue. Income — доход от выполнения работы, сдачи жилья в аренду, инвестиций и т. д. Revenue — это доход, который получает государство или предприятие.

My total income per year is way lower than yours. — Мой годовой доход значительно меньше твоего.

Government’s revenue comes from taxes. — Доход государства складывается из налогов.
TV channels are trying to attract more advertising revenue. — Телевизионные каналы стараются увеличить доход от рекламы.

Living или livelihood — средства к существованию.

What do you do for a living? — Чем ты зарабатываешь на жизнь?
They earn their livelihood from farming. — Они зарабатывают на жизнь фермерством.

Allowance — это денежное пособие, которое человек получает регулярно.

В американском английском слово allowance означает также «карманные деньги».

Do you get any allowance from your parents? — Ты получаешь какие-то деньги на карманные расходы от своих родителей?

Если вы освоили разницу между income, revenue, living и allowance, предлагаем вам список устойчивых выражений с этими словами.

Надеемся, вы разобрались в отличии wage от salary, разнице между income, revenue, living и allowance, а также запомнили устойчивые выражения с этими словами. Предлагаем пройти тест, чтобы закрепить изученное.

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How Does a Salary Range Work?

How Do Employers Use Salary Ranges to Motivate and Retain Staff?

sarote pruksachat / Getty Images

Susan Heathfield is an HR and management consultant with an MS degree. She has decades of experience writing about human resources.

Salary range is the range of pay established by employers to pay to employees performing a particular job or function. The salary range generally has a minimum pay rate, a maximum pay rate, and a series of mid-range opportunities for pay increases.

The salary range is determined by market pay rates, established through market pay studies, for people doing similar work in similar industries in the same region of the country.

Pay rates and salary ranges are also set up by individual employers and recognize the level of education, knowledge, skill, and experience needed to perform each job.

The salary range should reflect employer needs such as the overlap in salary ranges that will allow career development and pay increases without promotion at each level. It also considers the percentage of increase the organization will offer an employee for a promotion.

The salary range for executive-level positions is normally the largest. The salary range for lower-level positions is normally the narrowest. There is always more flexibility in the salary range with regard to senior leaders because their decisions impact the bottom-line and have a major effect across the entire organization.

What Employers Look at to Determine Salaries

Many companies participate in salary market surveys to create a trustworthy resource for salary research. More and more salary research is occurring online using salary calculators.

The salary range is also affected by additional demographic and market factors. These factors include the number of people available to perform a specific job in the employer’s region, competition for employees with the needed skills and education, and the availability of jobs.

In large organizations, an entire salary (or pay structure) is established to classify jobs, the relationship of one job to another, and the salary (or pay) ranges that fairly compensate the individuals performing the jobs.

In the end, you want to create salary ranges that motivate your employees to contribute. You also want to attract and retain the most superior employees to work in your organization.

How to Offer a Salary That Motivates Employees

Available information online makes researching salary ranges easier than previously—but, also trickier. The role of salary in helping you create a motivated, contributing workforce is inestimable.

These tips will help you address pay and salary range issues in a way that contributes to employee motivation in your organization.

Determine Salary Philosophy

Determine your organization’s salary philosophy. Do you believe in raising the level of base salaries in your organization, or do you appreciate the flexibility of variable pay?

A growing, entrepreneurial company, with variable sales and income, may find itself better off controlling the levels of base salaries. When times are good, the company can tie bonus dollars to goals achieved. In lean times, when money is limited, the company is not obligated to have high base salaries.

A strategically forward-thinking company, with fairly stable sales and earnings, may put more money in base salary.

Find Comparison Factors for Salary

The big question is whether you are competitive within your local market for most of your positions.

Start by researching the salary range for similar positions and job descriptions.

The job description is particularly important for comparisons but usually harder to find for comparison. Determine whether you are competitive with similar positions with organizations that have a similar size, sales volume, and market share. If you can find companies in the same industry, especially in your area or region, that is another good comparison source.

What Goals Must Salary Help You Achieve?

Pay must relate to the accomplishment of goals, the company mission, and vision. Any system that offers an employee the average increase for their industry or length of service (usually 1-4 percent) is counter-productive to goal accomplishment. Even an above-average increase that differentiates one staff person from another can demotivate.

Additionally, your pay system must help you create the work culture you desire. Paying an individual for his or her solo performance accomplishments alone, will not help you develop the team environment you want to achieve in your workplace

Therefore, you must carefully define the work culture that you want to create and pay the employees commensurate with their support of (and contribution) to that culture.

Finally, your salary strategy must align with your human resources goals and strategies. If the HR function is charged with developing a highly-skilled, outstanding workforce, you must pay above the industry or regional averages to attract the quality of employees you seek.

Paying less than comparable firms will bring you mediocre employees and fail to fulfill your desire to create an outstanding workforce. If on the other hand, the HR strategy is to get cheap labor in the door quickly, with little regard for turnover, you can pay people less salary.

Assess the Competition and Labor Markets

When unemployment is high, skilled people are available because of job loss and the economic downturn. Recently, however, the economic reality is that you may have had to hire good people for more money than in the past—because things were brighter. In the near future, you may have an easier time hiring skilled people once again. The market is ever-changing based on economics and what s happening in the world.

This economic reality is constantly changing and it affects the economic realities of salaries for employers and employees. In upcoming years, the war for talent, which is expected to occur as employers compete for fewer people with highly needed skills, the need for a fair, market-driven salary range is a given.

If you overpay or underpay an employee, it will eventually come back to haunt you. Overpay and you risk throwing your salary range off-kilter. It becomes economically unsustainable and unfair to longer-term employees who may make less than new employees.

If you try to underpay, even if an employee accepts a job, he or she may never feel valued by your organization and will continue to job search, using your company as a resting place until the right offer arrives. Nothing impacts employee morale as much as individuals who feel they are underpaid in comparison with others based on their contribution and that of other similar jobs.

Tout Your Benefits Package Role in Salary Satisfaction

An organization that offers better than average benefits may pay less salary and still have motivated, contributing employees. If your health plan fees go up and you continue to pay the cost, this is the same as money put in your employees’ pockets.

The range of benefits you offer, and their cost to the employer, is a critical component of any salary approach. The biggest mistake organizations make is the failure to communicate the value of the benefits offered.

Determine Bonus Philosophy and Potential

Ways to address bonuses, as part of your overall pay system, are limited only by your imagination. You may pay a bonus that is determined individually based on the value of the goals accomplished and the person to your organization. You may give all employees the same bonus, based on group goal attainment, across the board.

You may also use profit sharing in which a portion of company profits is paid out equally to every person who was employed during the time period.

Communicate Your Salary Philosophy and Approach

In many organizations, who gets what and why is a cause for consternation, gossip, demotivation, and unhappiness. The more transparent you make your pay and salary philosophy and determinations, the more likely you are to achieve positive employee morale and motivation.

Don’t keep your salary philosophy a secret. Even though individual compensation is confidential, your methods for determining pay must be clear and understandable to all employees.

Recognize That Salary Ranges Are Becoming Less Used

Salary ranges are becoming less relevant in the modern world of HR, but they do provide several essential and needed banks for employers to erect for employees.

According to a compensation consultant, Ann Bares in «Compensation Force,» «I’ve had the chance to work with many organizations who don’t have a formal salary structure, either smaller organizations yet to put in place any pay rules and policies or more established businesses who have (at some point) ditched their structures in an attempt to foster more ‘flexibility.’ What I’ve found, more times than not is that salary decision in these places are all over the map, with little rhyme or reason, and often made in response to pressure (employee complaints or implicit/explicit threats of leaving). And everyone knows it. Especially the employees.

«Having a salary structure of some kind in place ensures that there is a set of guardrails to prevent pay decisions from falling too far off the road. Perhaps more importantly, having a structure in place gives employees at least a minimal amount of assurance that there are rules which are followed and those salary decisions aren’t based entirely on whim, favoritism or discrimination.»

The Bottom Line

In the end, if you take these tips to heart and apply them to your organization, you will increase the likelihood that you’ll have happy, motivated employees.