When most people talk about an employee’s wage or salary, they’re describing the same idea. However, there is a distinction that should be made between the two terms. Most people know that employees who earn any type of income are put on Oregon payroll. Individuals with more than two streams of income, from stock dividends to retirement savings, are quicker to tell the difference between a person’s wages and a person’s salary.

Wage Earnings

Wage earnings are based on the hourly pay rate, which is multiplied by the number of hours worked per pay period. If an employee who works eight hours a day five times a week earns fifteen dollars an hour, they’ll have earned a gross pay of six-hundred dollars per week. Employees who earn wages are able to receive additional pay for working overtime, so employers will take into account the number of hours used to work beyond their usual workweek. Occasional overtime hours used on weekends don’t require compensation, but regularly work during those days must be considered under the Fair Labor Standards Act.

Salary Earnings

Employees who earn an annual rate are paid a salary. Contrary to wages, employees earn a fixed rate of income per pay period. Since the fixed rate earned is multiplied by the number of weeks semi-monthly worked per year, the total sum comes out to be a fixed amount. Salaried workers are more likely to receive benefits from their employer, potentially getting a fixed number of paid vacation days. They work in professional positions and earn a higher income than workers who are compensated by wages. There is also greater consistency in the pay provided since the salaried employee’s hours cannot be cut.

It’s helpful to know the difference between wage and salary earnings. Each employer should provide a transparent discussion with their employees to explain whether they’re being paid hourly or annually, which is further explained in a mutual agreement that is signed by both parties.