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Knowing the difference between wages and salary is important for determining what's best for your business as an employer. Here are the differences between the two, as well as the advantages and disadvantages of each option.

Difference between wages and salary

The terms salary and wages are often used interchangeably, however, they’re actually quite different concepts. 

What is a salary?

A salary is a set amount paid into an employee’s bank account at predetermined intervals, usually fortnightly or monthly. Tax and national insurance are deducted before the employee is paid.

Advantages of salaried employment

  • Both parties know how much money must be paid/received every month (this allows you and your employees to budget and provides certainty to everyone as you know how much is coming in and going out)
  • A salary is usually paid to employees with higher skills (often a salaried worker will need to work longer hours to ensure certain tasks/projects are completed and this is reflected in the amount they are paid)

Disadvantages of salaried employment

  • Overtime is one of the main disadvantages of salaried pay as tracking overtime can be a bit of a challenge (generally, a salaried employee is required to get their job done no matter how long it takes)
  • During times of financial difficulty, the company might be inclined to cut the salary of their employees

What is a wage?

Wages are based on the number of hours or days someone has worked for you and therefore, the amount paid can vary. Like a salary, tax and national insurance contributions are paid before the employee receives their wage. 

Advantages of wage employment

  • You only have to pay for the hours worked (if an employee has to leave early one day it is easy to deduct the unworked hours from their pay, something that is more difficult to do in the case of salaried employees)
  • Wages can be paid weekly which suits many businesses directly related to the number of hours that they’ve worked
  • Overtime is easy to calculate and generally be paid extra for the time they work in addition to their 'normal' working hours

Disadvantages of wage employment

  • If you need to cut down on expenses due to financial troubles in most cases employee hours are the first to go so they will receive a smaller paycheck
  • Waged employees usually don't have the same benefits as salaried employees

Wrapping up

The above is a brief overview of the differences between paying your employees a salary or a wage. If you have any other questions, speak to one of our employment law solicitors who will be happy to help you on this and all other employment and commercial law matters.

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In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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