Wages refer to the monetary compensation employees receive from their employers for the work they’ve done. This monetary compensation is usually based on the total amount of time they’ve spent working and agreed upon before the employment contract is signed.
Wages vs. salary
Some people use the terms wage and salary interchangeably, but there’s a slight difference.
Wages typically refer to hourly, weekly, or monthly amounts of money a worker receives for the work performed. The wage can vary based on the number of hours worked, so the worker doesn’t receive a fixed amount every week or month.
Salary refers to the fixed annual employee compensation, paid in intervals determined by the employer. When we say annual salary, we usually mean total employee remuneration—gross salary—the cash value of the compensation, including statutory employee benefits, such as social security and health insurance.
Examples of wages
There are several types of wages:
- Hourly wage: Employers pay their employees on an hourly basis (common for part-time workers).
- Living wage: The lowest wage an employer can offer their employees, but which is not determined by law (so it’s different from minimum wage).
- Fair wage: The acceptable amount of money that an employer needs to offer their employees, based on the employee’s location and cost of living and the typical wage for a particular position.
- Real wage: The worth of a wage expressed in the amount of goods an employee can buy with it, or the amount of money a wage earner receives after the wage has been adjusted for inflation.
- Prevailing wage: The typical wage employees receive when a government agency contracts them (common for civil engineers, urban planners, construction supervisors, etc.)
- Supplemental wage: An additional wage paid to non-salaried employees, such as overtime pay if they work past a regular 40-hour workweek.
Most wages are taxable and employees need to report them as personal income tax wages.
Minimum wages around the world
In most countries, workers have the right to earn a minimum wage: the lowest amount of money a worker can receive for an hour of work. Minimum wage laws usually apply to full-time and part-time employees, but not independent contractors.
Minimum wage rates vary by country. Here are a few examples of minimum monthly wages:
- Georgia - $8-$48
- Tanzania - $17-$172
- Pakistan - $150
- Argentina - $264
- Turkey - $372
- Greece - $776
- Germany - $1,466
- Canada - $1,696
- Switzerland - $2,391-$4,564
How to calculate wages
You can easily calculate your employees’ wages by multiplying their hourly rate by the number of hours they worked. This means that the employer needs to calculate wages before each payday, especially if employees had overtime hours or time off.
The easiest way to calculate wages is to use payroll software and automate this process.The number of payments you will make depends on your choice of pay period, whether you have salaried or hourly employees. If you pay your workers bi-weekly, there will be 26 installments every year. If you do it semi-monthly, there will be 24 payments per year, and so on.