Difference between salary and wage and how to calculate them

By Indeed Editorial Team

Updated 29 September 2022

Published 16 August 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

During your career, you may come across different work opportunities and payment methods. It's possible that a potential employer asks you if you'd prefer to receive a monthly salary or if you want your income calculated based on how many hours you worked each week. Knowing the difference between salary and wage allows you to plan your career goals and prepare for discussing income during a job interview. In this article, we explore wages vs. salary by defining each one and discussing their primary differences and similarities.

Related: Gross Pay vs. Net Pay: Definitions and Examples

Difference between salary and wage

Depending on your expectations and situation, knowing the difference between salary and wages can help you decide what type of employment is better for you. Here are some basic differences between being a salaried and waged employee:

Consistency

If you work a salaried job, your employer guarantees to pay you a fixed amount every week or month. This means that you can easily upkeep your standard of living. It's also easier to plan ahead for holidays or bigger expenses if you know how much you'll have to spend each month.

When it comes to waged workers, their employment is often temporary and short term. This sometimes means that employers can dismiss them without giving them notice. As a result, the income of a waged worker can easily change depending on how many hours they worked each month, impacting the consistency of their employment.

Related: What is annual gross income and how do I calculate it?

Pay

Typically, salaried employees have more work responsibilities than contract or temporary employees. It's common that they work longer hours, and some companies also require that they constantly improve their qualifications. This sometimes results in higher compensation because the employers want to make the work attractive for them so that they continue working there. It's also more common for salaried employees to receive regular promotions and raises, which increases their pay.

Related: Top 10 Jobs That Pay Well in the UK

Employee benefits

Salaried employers can typically expect more employee benefits. Many corporations and private companies may decide to offer them corporate gym memberships, private health insurance or monetary bonuses for working at the company for a given period of time. Employers realise that experienced and highly qualified professionals can quickly find employment elsewhere, which is why they try to make working at their company as attractive as possible for their current salaried employees. When it comes to hourly staff, their benefits are often only one-time bonuses and not a regular occurrence.

Overtime

Working overtime can be challenging for some salaried employees. This is because with this type of employment, tracking and calculating overtime is typically more complex than for hourly employees, who automatically track their working time. If you're interviewing for a salaried position, be sure to discuss overtime with your potential employer ahead of time. Doing this can help you make sure you know what to expect from working at the company.

Pay cuts

If a company that you work for has financial problems, the management may decide to reduce the employees' salaries until the difficulty is over. They often do this without reducing your hours, which means you may end up working the same amount of time for less money. When it comes to waged workers, their employers normally cut their hours, but their hourly rate stays the same. This means that they have more free time available and can look for a side job to make up for the cut in order to still make the same amount each month.

Less variety

It's common for employers to invest more in their salaried employees, offer them more benefits and expect more from them. If you're considering interviewing for a salaried position, be sure to carefully define your professional goals. It's possible that when you get the job, your employer may expect a bigger time commitment from you. If you value variety at work, find adapting to new environments exciting or want to have more free time, working in a waged position may be a better fit for you.

Salary vs. wages

Here are the two most common questions about payment methods that job seekers ask when preparing to enter the workforce:

What is salary?

A salary is a form of periodic payment, an agreed-upon amount of money that your employer pays you for your work. If you're interviewing with a company and the employer states the income amount as an annual sum per year, you're likely interviewing for a salaried position. You're also more likely to have a salary if you're looking for a full-time position at a corporation or private company with a structured career path.

It's common that employers state the salary information in an employment contract as an annual amount, but you can usually choose to receive this fixed regular payment monthly, biweekly or weekly. For example, if your employment contract specifies that your annual salary is £24,000, you can easily calculate your monthly income by dividing it by the number of months in a year:

£24,000 per year / 12 months = £2,000 per month

What are wages?

A wage is a fixed payment that you receive if you work on an hourly or daily basis. It can be a variable amount, which means that the more you work, the more you earn. It's common for employers to pay wages daily, but you can also sometimes come across a system where your working hours sum up and you receive payments weekly or monthly.

It's also possible for a waged employee to receive payments for their work without signing an employment contract. This means that there's no annual amount specified by the employer, just the hourly rate, which is especially common for short-term employments of under a month. If you'd like to calculate how much you made in a month, you need to take into consideration your hourly rate and the number of hours you worked, for example:

£8.91 (hourly rate) x 155 (hours worked in a month) = £1,381.05 (monthly payment)

Read more: How To Calculate Annual Earnings From an Hourly Rate

Similarities between salary and wage

Here are some similarities between a salary and wage to consider when discussing the type of payment with your prospective employer:

Holidays

Typically, both salaried and hourly employees can go on a paid leave each year. Salaried employees are more likely to receive more paid holidays each year, including longer annual leave, but they may need to take into consideration important work deadlines when planning their holidays. Waged employees often have a more flexible work schedule, but it's also common for them to plan their annual leave around other coworkers' schedules.

Recruitment process

Although in some cases the type of payment method that an employer offers you may impact your job responsibilities, they often require all candidates to go through the same recruitment process. This includes everything from sending an application to going through the first and second rounds of interviews. It's also quite common to test both salaried and waged employees by assigning them recruitment tasks. These may include interview presentations or other projects.

Related: 15 Signs a Job Interview Went Well

Career growth

How your employer calculates your salary is sometimes just a reflection of their needs and the company's financial situation. This means that being a salaried or hourly employee rarely has an effect on your career growth. Approaching each task or shift with excitement and ambition can help you improve your skills and gain valuable experience in almost every work environment.

Tips for choosing the right payment method

Consider these additional tips if you're still unsure about your preferred payment method and need help deciding which one is best for you:

  • Get to know yourself. How you get paid often influences the way you feel and approach work every day. When looking for a job, listen to your needs and ask yourself what you value more, the security that a salary brings or the flexibility of working hourly.

  • Define your goals. Make a list of the things that you'd like to accomplish during your time at the company and confront that with how you get paid. If having less money but more time suits your lifestyle better, you can consider choosing a waged position and working part time.

  • Set expectations. It's common that candidates start as waged employees and get promoted to salaried staff after an agreed-upon period of time. If your prospective employer practices this, be sure to discuss your salary expectations with them to know if you can see yourself working there long term.


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