What Are The Differences Between Wage And Salary?

There are distinct differences between a wage and a salary. Photo by Sharon McCutcheon on Unsplash
There are distinct differences between a wage and a salary. Photo by Sharon McCutcheon on Unsplash
  • Generally speaking, those who earn a salary earn more money than those who earn an hourly wage.
  • You can potentially earn more per hour if you work overtime often throughout the year, than someone who earns an annual salary.
  • People who earn a salary of about $50,000 per year are earning about $26 per hour, but can not earn overtime pay.

You may have heard the terms bandied about in conversation: wage and salary. Both words refer to money that you earn for working, but they mean slightly different things. Most of the differences between the two words hinge on how you are paid over a period of time, and whether you are paid per piece, by the hour, or over the span of a year. 


A wage is a payment of money for labor or services. Photo by Alexander Mils on Unsplash

According to Merriam Webster, “wage” is defined as “a payment usually of money for labor or services usually according to contract and on an hourly, daily, or piecework basis”. 

In essence, when you earn a wage or wages, you are paid by the hour or day, or by the amount of work you complete. So, for example, if you work for a company that installs pools, and you are paid $20 per hour for your work, this is a wage. If you are paid $200 per pool you install, this is also an example of earning a wage. 

Earning a wage can be beneficial in some circumstances, as those who work more hours than their contract stipulates are considered to be working “overtime”. In this case, someone who works more than a certain amount of hours per week as a wage earner is entitled to earn 1.5 x their salary once they hit overtime. Different countries and locations have different rules as to what constitutes the overtime threshold. In some places you hit the mark when you work more than 40 hours per week. In other places it may be more or less than this. Hypothetically speaking, someone earning a high wage who is working overtime often throughout the year can potentially earn more than a salaried worker who is earning a low annual salary. Generally speaking, however, wage earners tend to earn less per year than those earning a salary. 


A salary is a fixed compensation that is paid regularly. Photo by Jp Valery on Unsplash

The term “salary” refers to “fixed compensation paid regularly for services”. 

People who work for others or themselves, and who earn a salary, earn a fixed amount per year which is divided up into equal payments every two weeks. For example, if you work as an accountant for an accounting firm, you might earn a salary of $200,000 per year. This would be broken down into bi-weekly payments of about $8,300. Generally speaking, a person who earns a salary holds a professional position. Wage earners can also be professionals, but they often earn less per year than salaried workers. 

Salaried positions often require more education than those available to wage earners. One of the disadvantages of earning a salary is that you are not given the chance to earn overtime pay, as a wage earner can. You may be expected to work well over the typical forty-hour workweek, however. 

For example, if you are earning a salary of about $52,000 per year, you are essentially earning about $26 per hour, if you work forty hours per week. A wage earner being paid $26 per hour could get a better deal as he or she has the potential to earn $39 per hour when working overtime. As salaries increase, however, it is generally considered to be a better deal to earn a salary, as your income is fixed and predictable. Salaried positions may also come with benefits such as medical and dental benefits. There are benefits and drawbacks to earning both a wage and a salary. By choosing work that you like, you better your chances of increasing your monetary success. 


More in Economics