Remuneration: salary and wage

Remuneration is the financial payment you receive for the work you do. It is a financial method of motivation, and two common forms are salary and wage.

Salary

A salary is a fixed annual amount, usually paid in equal monthly amounts. For example, a salary of £27,000 a year is £2,250 a month, whatever the number of working days.

It gives the employee a predictable income, making budgeting easier, and the business finds pay costs easy to plan and budget. However, the employee gets no extra pay for overtime or extra effort, and the business pays the same even when output is low.

Wage

A wage is normally paid weekly and varies with hours worked or output. For example, £11 an hour for 30 hours is £330; 35 hours is £385.

The employee is paid for extra hours worked, so overtime is rewarded. The business pays only for time worked, which suits flexible or seasonal demand: an ice cream seller can pay for more hours in a hot week. But the employee's income can be uncertain, and overtime rates can raise business costs sharply when busy.

Comparing salary and wage