Difference between Salary and Wage

June 6, 2016 by Editorial Team

The terms salary and wage are often used interchangeably. Having almost the same meaning, this can be confusing at times. Moreover, employment laws do not provide specific definitions for either. While interchangeable usage of both terms may be accepted in some locations or businesses, they actually have their own meaning and are considered grammatically wrong if used improperly.



A graph showing the real median household salary in the United States in 2014

Salary is a periodic payment to an employee as a compensation for his/her performance regardless of the hours worked.  It is usually a fixed amount of money paid in fixed intervals (e.g. 15th day pay, monthly payments, or in some cases, weekly payments). The fixed amount is generally a fraction of an employee’s annual pay. The said payment is usually specified in an employment contract.

Having a fixed amount of payment annually, a salary has its own drawbacks. Overtime is usually ignored and will not be compensated, regardless of how many hours are worked. Also, once salary is decided, it remains fixed throughout (unless of course the employee is given a raise or promotion).

Salary may have its own drawbacks, but it does come with its perks as well. Salary is also known to be a package, which means that employees do not only receive money as payment, but also other compensations like medical insurance, retirement fee, paid leave/vacations, educational plan, and other benefits.

Salary is usually determined through comparison of market pay rates, leveling the pay rates and salary that was established by the employer, the skill of the employee, or even the availability of people that can perform the specified job.


The minimum wages of developed economies in $/hour in 2013

In contrast to salary, a wage is generally a monetary compensation paid by an employer to an employee in regards of his/her hours worked. Instead of a compensation quoted on an annual basis, the amount paid will be based on the number of hours worked multiplied by the employee’s hourly rate. Paychecks are also received sooner than a salary, most likely a few days after the work period or when the job is done.

As with the salary, a wage does have its downside. If you leave work, you won’t get paid regardless of your reason. If you’re sick or pregnant and can’t get to work, you won’t be paid. It means you strictly have to be present and working in order to get paid. You won’t get any paid vacations, paid sick leaves etc.

A wage may seem undesirable at this moment, but it also does have its advantages. Unlike the salary, overtime is compensated. If you work 50 hours in a week, you will receive the full 50 hours multiplied with your rate as payment. For some, the first 40 hours would be paid at your regular rate, and the excess hours would be 1.5 times your normal rate. This opportunity is usually not given to salary earners.

A wage is usually determined by the skill of the employee, availability of people that can perform the specified job, or through comparison of market pay rates.


They may both pertain to the compensation for a job done, but they do differ in everything else.

Historically, manual labor jobs meant earning wages, while professional jobs meant having salaried positions. Today, they have their own meanings. Wage earners work at an hourly rate, and salary earners work at a fixed rate. Their payment cycle also differs as a salary is usually paid monthly, while a wage is usually paid soon after the work is done. If you are a salary earner, you can be considered lucky as salary earners have other benefits like insurance, paid leaves and the like. Wage earners don’t get to have these benefits but what they do get is paid overtime. They can work more than 30 or 40 hours per week and the extra hours will still be compensated. Lastly, a salary has a fixed rate, while a wage has changing rates, mostly through current market pay rates.

Comparison Chart

A fixed pay on an annual basisA variable pay on an hourly basis
Payment cycle can go from 15th day, monthly, or weeklyPayment cycle is within a few days after the job is done
No extra pay for extra hoursHas extra pay for extra hours
Has benefits like paid leaves, medical insurance etc. (depending on the contract)No benefits but can receive bonuses (depending on the employer)


Here is a short but informative video comparison of a salary and a wage.