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1. Introduction
Wages and salaries are the remuneration paid or payable to employees for work performed on
behalf of an employer or services provided. Normally, an employer is not permitted to withhold
the wages or any part thereof, except as permitted or required by law. Employers are required by
law to deduct from wages, commonly termed "withhold", income taxes, social contributions and
for other purposes, which are then paid directly to tax authorities, social security authority, etc.,
on behalf of the employee. Garnishment is a court ordered withholding from wages to pay a debt.
Wages and salaries are typically paid directly to an employee in the form of cash or in a cash
equivalent, such as by cheque or by direct deposit into the employee's bank account or an
account directed by the employee. Alternatively, all or a part may be paid in various other ways,
such as payment in kind in the form of goods or services provided to the employee such as food
and board.
For tax purposes, wages and salaries normally do not include other non-cash benefits received by
an employee, such as flights, payment of school fees etc. These are usually referred to as fringe
benefits.
In the national accounts, in accordance with the System of National Accounts, wages and salaries
are the sum of remuneration paid to employees, including the values of any social
contributions, income taxes, etc., payable to employees. For administrative convenience, or due
to a legal requirement or some other reason all or a part of such payments may actually be
withheld by the employer and paid directly to tax authorities, etc., on behalf of the employee.
However, labour-related expenses of a business, such as payroll taxes, pension fund
contributions, social insurance schemes, workers compensation insurance, etc., are not counted
as wages and salaries for national accounts purposes. Similar concepts apply to general
accounting treatment of labour expenses.
Wages and salaries in cash consist of such amounts payable at regular intervals, such as weekly,
monthly or other intervals, including payments by results and piecework payments; plus
allowances, such as those for working overtime; plus amounts paid to employees away from
work for short periods (e.g., on holiday, sick leave, etc.); plus ad hoc bonuses and similar
payments; plus commissions, gratuities and tips received by employees.
Wages and salaries in kind consist of remuneration in the form of goods or services that are not
necessary for work and can be used by employees in their own time, and at their own discretion,
for the satisfaction of their own needs or wants or those of other members of their households.

2. Objectives of Wage and Salary
 To acquire qualified competent personnel
 To retain the present employees
 To secure internal and external equity.
 To ensure desired behaviour.
 To keep labour and administrative costs
 To protect in public as progressive employers
 To pay according to the content and difficulty
 To facilitate payroll.
 To simplify collective bargaining
 To promote organization.
The Organization of the future will be so technologically advanced that just one person and a dog
will run it. To person will be there to reed the dog and the dog will be there to make sure that the
person doesn’t touch anythings.

3. Salary
A salary is a form of periodic payment from an employer to an employee, which may be
specified in an employment contract. It is contrasted with piece wages, where each job, hour or
other unit is paid separately, rather than on a periodic basis. From the point of view of running a
business, salary can also be viewed as the cost of acquiring and retaining human resources for
running operations, and is then termed personnel expense or salary expense. In accounting,
salaries are recorded in payroll accounts.
Salary is a fixed amount of money or compensation paid to an employee by an employer in
return for work performed. Salary is commonly paid in fixed intervals, for example, monthly
payments of one-twelfth of the annual salary.
Salary is typically determined by comparing market pay rates for people performing similar
work in similar industries in the same region. Salary is also determined by leveling the pay rates
and salary ranges established by an individual employer. Salary is also affected by the number of
people available to perform the specific job in the employer's employment locale.
While there is no first pay stub for the first work-for-pay exchange, the first salaried work would
have required a society advanced enough to have a barter system which allowed for the even
exchange of goods or services between tradesmen. More significantly, it presupposes the
existence of organized employers—perhaps a government or a religious body—that would
facilitate work-for-hire exchanges on a regular enough basis to constitute salaried work. From
this, most infer that the first salary would have been paid in a village or city during the Neolithic
Revolution, sometime between 10,000 BCE and 6000 BCE.
A cuneiform inscribed clay tablet dated about 3100 BCE provides a record of the
daily beer rations for workers in Mesopotamia. The beer is represented by an upright jar with a
pointed base. The symbol for rations is a human head eating from a bowl. Round and
semicircular impressions represent the measurements.
By the time of the Hebrew Book of Ezra (550 to 450 BCE), salt from a person was synonymous
with drawing sustenance, taking pay, or being in that person's service. At that time, salt
production was strictly controlled by the monarchy or ruling elite. Depending on the translation
of Ezra 4:14, the servants of King Artaxerxes I of Persia explain their loyalty variously as
"because we are salted with the salt of the palace" or "because we have maintenance from the
king" or "because we are responsible to the king".
The Latin word salarium linked employment and salt, but the exact link is not very clear.
Modern sources maintain that the word salarium is derived from the word sal (salt) because at
some point a soldier's salary may have been an allowance for the purchase of salt[4] or the price
of having soldiers conquer salt supplies and guard the Salt Roads (Via Salaria) that led to
Rome.[5][6] But there is no evidence for this assertion at all.[7] Some people even claim that the
word soldier itself comes from the Latin sal dare (to give salt),[8] but mainstream sources

4. disagree, noting that the word soldier more likely derives from the gold solidus introduced
by Diocletian in 301 CE.
Regardless of the exact connection, the salarium paid to Roman soldiers has defined a form of
work-for-hire ever since in the Western world, and gave rise to such expressions as "being worth
one's salt".
Within the Roman Empire or (later) medieval and pre-industrial Europe and
its mercantile colonies, salaried employment appears to have been relatively rare and mostly
limited to servants and higher status roles, especially in government service. Such roles were
largely remunerated by the provision of lodging, food, and livery clothes (i.e., "food, clothing,
and shelter" in modern idiom). Many courtiers, such as valets de chambre, in late medieval
courts were paid annual amounts, sometimes supplemented by large if unpredictable extra
payments. At the other end of the social scale, those in many forms of employment either
received no pay, as with slavery (although many slaves were paid some money at least), serfdom,
and indentured servitude, or received only a fraction of what was produced, as
with sharecropping. Other common alternative models of work included self- or co-operative
employment, as with masters in artisan guilds, who often had salaried assistants, or corporate
work and ownership, as with medieval universities and monasteries.
Today, the concept of a salary continues to evolve as part of a system of the total compensation
that employers offer to employees. Salary (also now known as fixed pay) is coming to be seen as
part of a "total rewards" system which includes bonuses, incentive pay, commissions, benefits
and perquisites (or perks), and various other tools which help employers link rewards to an
employee's measured performance.
Compensation has evolved considerably. Consider the change from the days of and before the
industrial evolution, when a job was held for a lifetime, to the fact that, from 1978 to 2008,
individuals who aged from 18 to 44, held an average number of 11 jobs. Compensation has
evolved gradually moving away from fixed short-term immediate compensation towards fixed +
variable outcomes-based compensation.[citation needed] An increase in knowledge-based work has
also led to pursuit of partner (as opposed to employee) like engagement.

5. Negotiation of Salary
Prior to the acceptance of an employment offer, the prospective employee usually has the
opportunity to negotiate the terms of the offer. This primarily focuses on salary, but extends to
benefits, work arrangements, and other amenities as well. Negotiating salary can potentially lead
the prospective employee to a higher salary. In fact, a 2009 study of employees indicated that
those who negotiated salary saw an average increase of $4,913 from their original salary offer. In
addition, the employer is able to feel more confident that they have hired an employee with
strong interpersonal skills and the ability to deal with conflict. Negotiating salary will thus likely
yield an overall positive outcome for both sides of the bargaining table.
Perhaps the most important aspect of salary negotiation is the level of preparation put in by the
prospective employee. Background research on comparable salaries will help the prospective
employee understand the appropriate range for that position. Assessment of alternative offers
that the prospective employee has already received can help in the negotiation process. Research
on the actual company itself will help identify where concessions can be made by the company
and what may potentially be considered off-limits. These items, and more, can be organized into
a negotiations planning document that can be used in the evaluation of the offers received from
the employer.

6. Effects of perspective
The same 2009 study highlighted the personality differences and negotiation mind-sets that
contributed to successful outcomes. Overall, individuals who are risk-averse (e.g., worried about
appearing ungrateful for the job offer) tended to avoid salary negotiations or use very weak
approaches to the negotiation process. On the contrary, those who were more risk-tolerant
engaged in negotiations more frequently and demonstrated superior outcomes. Individuals who
approached the negotiation as a distributive problem (i.e. viewing the a higher salary as a win for
him/her and a loss to the employer) ended up with an increased salary, but lower rate of
satisfaction upon completion. Those who approached the negotiation as an integrative problem
(i.e. viewing the negotiation process an opportunity to expand the realm of possibilities and help
both parties achieve a “win” outcome) were able to both secure an increased salary and an
outcome they were truly satisfied with.[29]
Gender differences
Salary disparities between men and women may partially be explained by differences in
negotiation tactics used by men and women. Although men and women are equally likely to
initiate in a salary negotiation with employers, men will achieve higher outcomes than women by
about 2% of starting salary Studies have indicated that men tend to use active negotiation tactics
of directly asking for a higher salary, while women tend to use more of an indirect approach by
emphasizing self-promotion tactics (e.g. explaining the motivation to be a good
employee). Other research indicates that early-childhood play patterns may influence the way
men and women negotiate. Men and women tend to view salary differently in terms of relative
importance. Overall level of confidence in a negotiation may also be a determinant of why men
tend to achieve higher outcomes in salary negotiations.[Finally, the awareness of this stereotype
alone may directly cause women to achieve lower outcomes as one study indicates.Regardless of
the cause, the outcome yields a disparity between men and women that contributes to the overall
wage gap observed in many nations.
The Constitution of the Republic of South Africa 239 provides for the right to fair labour
practices in terms of article 23. article 9 of the Constitution makes provision for equality in the
Bill of Rights, which an employee may raise in the event of an equal pay dispute. In terms of
article 9(1) “everyone is equal before the law and has the right to equal protection and benefit of
the law'” Furthermore, “the state may not unfairly discriminate directly or indirectly against
anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or
social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture,
language, and birth.”[South African employees who were in paid employment had median
monthly earnings of R2 800. The median monthly earnings for men (R3 033) were higher than
that for women (R2 340) - women in paid employment earned 77,1% of what men did

7. Role of weight
Research done in 2011 showed that the “weight double standard” may be more complex that
what past research has suggested. This is not only relevant to women, but also to men. The
smallest income gap differences occur at thin weights (where men are penalized and women are
rewarded) and the opposite happens at heavier weights, where the women are affected more
negatively.

8. Wages
A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by
an employer to an employee in exchange for work done. Payment may be calculated as a fixed
amount for each task completed (a task wage or piece rate), or at an hourly or daily rate, or based
on an easily measured quantity of work done.
Wages are examples of expenses that are involved in running a business.
Payment by wage contrasts with salaried work, in which the employer pays an arranged amount
at steady intervals (such as a week or month) regardless of hours worked,
with commission which conditions pay on individual performance, and with compensation based
on the performance of the company as a whole. Waged employees may also receive tips
or gratuity paid directly by clients and employee benefits which are non-monetary forms of
compensation. Since wage labour is the predominant form of work, the term "wage" sometimes
refers to all forms (or all monetary forms) of employee compensation.
Wage labour involves the exchange of money for time spent at work (the latter quantity is
termed labor power by Marx and subsequent economists). As Moses I. Finley lays out the issue
in The Ancient Economy:
The very idea of wage-labour requires two difficult conceptual steps. First it requires the
abstraction of a man's labour from both his person and the product of his work. When one
purchases an object from an independent craftsman … one has not bought his labour but the
object, which he had produced in his own time and under his own conditions of work. But when
one hires labour, one purchases an abstraction, labour-power, which the purchaser then uses at a
time and under conditions which he, the purchaser, not the "owner" of the labour-power,
determines (and for which he normally pays after he has consumed it). Second, the wage labour
system requires the establishment of a method of measuring the labour one has purchased, for
purposes of payment, commonly by introducing a second abstraction, namely labour-time.
The wage is the monetary measure corresponding to the standard units of working time (or to a
standard amount of accomplished work, defined as a piece rate). The earliest such unit of time,
still frequently used, is the day of work. The invention of clocks coincided with the elaborating
of subdivisions of time for work, of which the hour became the most common, underlying the
concept of an hourly wage.
Wages were paid in the Middle Kingdom of Ancient Egypt, Ancient Greece, and Ancient Rome.

9. Types of Wages
In real practice, wages are of many types as follows:
1. Piece Wages:
Piece wages are the wages paid according to the work done by the worker. To calculate the piece
wages, the number of units produced by the worker are taken into consideration.
2. Time Wages:
If the labourer is paid for his services according to time, it is called as time wages. For example,
if the labour is paid Rs. 35 per day, it will be termed as time wage.
3. Cash Wages:
Cash wages refer to the wages paid to the labour in terms of money. The salary paid to a worker
is an instance of cash wages.
4. Wages in Kind:
When the labourer is paid in terms of goods rather than cash, is called the wage in kind. These
types of wages are popular in rural areas.
5. Contract Wages:
Under this type, the wages are fixed in the beginning for complete work. For instance, if a
contractor is told that he will be paid Rs. 25,000 for the construction of building, it will be
termed as contract wages.

10. Concepts of Wages
The following are the two main concepts of wages:
A. Nominal Wage:
B. Real Wage:
A. Money Wages or Nominal Wages:
The total amount of money received by the labourer in the process of production is called the
money wages or nominal wages.
B. Real Wages:
Real wages mean translation of money wages into real terms or in terms of commodities and
services that money can buy. They refer to the advantages of worker’s occupation, i.e. the
amount of the necessaries, comforts and luxuries of life which the worker can command in return
for his services.
An example will make the things clear. Suppose ‘A’ receives Rs. 500 p.m. as money wages
during the year. Suppose also that midway through the year the prices of commodities and
services, that the worker buys, go up, on the average, by 50%.
It means that though the money wages remain the same, the real wages (consumption basket in
terms of commodities and services) are reduced by 50%. Real wages also include extra
supplementary benefits along with the money wages.
Distinction between Real and Money Wages:
Adam Smith has distinguished the money wages and real wages on the following basis:
1. Relation with Price:
Keeping all other things constant, there exists inverse relation between real wages and price i.e.
with the increase in price level real wages tend to decline and vice-versa.
2. Money and Real Wages:
Ceterus paribus, an increase in money wages will lead to an increase in real wages. It is due to
the reason that with the increase in money wages, a labourer can purchase more goods and
services than before.
3. Basic Difference:
According to Adam Smith, money wages are paid in terms of the quantity of money whereas real
w ages are paid in terms of necessaries of life. Therefore money w ages are expressed in terms of
money and that of real wages in terms of goods and services.

11. Determinants of wages Rate
Depending on the structure and traditions of different economies around the world, wage rates
will be influenced by market forces (supply and demand), legislation, and tradition. Market
forces are perhaps more dominant in the United States, while tradition, social
structure and seniority, perhaps play a greater role in Japan.
Even in countries where market forces primarily set wage rates, studies show that there are still
differences in remuneration for work based on sex and race. For example, according to the U.S.
Bureau of Labor Statistics, in 2007 women of all races made approximately 80% of the median
wage of their male counterparts. This is likely due to the supply and demand for women in the
market because of family obligations.Similarly, white men made about 84% the wage of Asian
men, and black men 64%. These are overall averages and are not adjusted for the type, amount,
and quality of work done.
Seventy-five million workers earned hourly wages in the United States in 2012, making up 59%
of employees.[9] In the United States, wages for most workers are set by market forces, or else
by collective bargaining, where a labor union negotiates on the workers' behalf. The Fair Labor
Standards Act establishes a minimum wage at the federal level that all states must abide by,
among other provisions. Fourteen states and a number of cities have set their own minimum
wage rates that are higher than the federal level. For certain federal or state government contacts,
employers must pay the so-called prevailing wage as determined according to the Davis-Bacon
Act or its state equivalent. Activists have undertaken to promote the idea of a living wage
rate which account for living expenses and other basic necessities, setting the living wage rate
much higher than current minimum wage laws require. The minimum wage rate is there to
protect the well being of the working class.
For purposes of federal income tax withholding, 26 U.S.C. § 3401(a) defines the term "wages"
specifically for chapter 24 of the Internal Revenue Code:
"For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a
public official) for services performed by an employee for his employer, including the cash value
of all remuneration (including benefits) paid in any medium other than cash;" In addition to
requiring that the remuneration must be for "services performed by an employee for his
employer," the definition goes on to list 23 exclusions that must also be applied.

12. Difference Between Wages and Salary
The term salary and wages is often confused by people and is used interchangeably. But the truth
is that both these terms differ from each other and hold different meanings. Salary is a fixed
amount paid to the employees at regular intervals for their performance and productivity whereas
wages are the hourly- based payment given to the labor for the amount of work finished in a day.
To further enhance the understanding below is the primary difference between salary and wages:
Content: Salary Vs Wages
1. Comparison Chart
2. Definition
The essential difference between a salary and wages is that a salaried person is paid a fixed
amount per pay period and a wage earner is paid by the hour.
Someone who is paid a salary is paid a fixed amount in each pay period, with the total of these
fixed payments over a full year summing to the amount of the salary. This person is considered
to be an "exempt" employee. There is no linkage between the amount paid and the number of
hours worked.
For example, if a person has a $52,000 salary and he is paid once a week, then the gross amount
of each of the 52 paychecks he receives during the year is $1,000 ($52,000 / 52 weeks). The
person receiving a salary is not paid a smaller amount for working fewer hours, nor is he paid
more for working overtime.
Someone who is paid wages receives a pay rate per hour, multiplied by the number of hours
worked. This person is considered to be a "non-exempt" employee. For example, a person who is
paid a wage of $20 per hour will receive gross pay of $800 ($20/hr x 40 hours) if he works a
standard 40 hour week, but will only receive gross pay of $400 ($20/hr x 20 hours) if he works
20 hours in a week. A person who receives wages is also entitled to overtime pay of 1.5x his
normal rate of pay if he works more than 40 hours per week.
There is also a difference between salary and wages in regard to the speed of payment. If a
person is paid a salary, he is paid through and including the pay date, because it is very simple
for the payroll staff to calculate his salary, which is a fixed rate of pay. However, if a person is
paid wages, he is usually paid through a date that is several days prior to the pay date; this is
because his hours may vary, and the payroll staff needs several days to calculate his pay.
If a person is paid wages and there is a gap between the last day worked for which he is paid and
his pay date, that gap is paid in his next paycheck. This gap does not exist for a salaried worker,
since he is paid through the pay date. Thus, pay is much more likely to be accrued in a
company's financial statements for a person being paid wages than for someone being paid a
salary.

13. The expression of a person's pay rate varies depending on whether that person receives a salary
or wages. Thus, a person may receive a salary of $52,000, or wages of $25.00 per hour.
Assuming a standard work year of 2,080 hours per year, the person receiving wages of $25.00
per hour is actually earning the same gross pay as the person receiving a salary of $52,000 (2,080
hours x $25/hour), though the person earning a wage has the opportunity to earn overtime, and so
can be considered in a better compensation situation than the person being paid a salary.

14. Comparison Chart
BASIS FOR
COMPARISON
SALARY WAGE
Meaning A fixed pay that an individual
draws for the work done by him
on an annual basis.
A variable pay that an individual
draws on the basis of hours spent in
completing the certain amount of
work.
Skills Skilled personnel Semi-skilled or unskilled
Type of cost Fixed Variable
Rate of payment Fixed rate Wage rate
Payment cycle Monthly Daily
Basis of payment Performance basis Hourly basis
Paid to whom Employees Labor
Nature of work Administrative-office work Manufacturing-process work
KRA
(Key resultant area)
Yes No
Extra pay for extra hours No Yes

15. Definition of Salary
The term salary is the agreed upon amount of money between the employer and the employee
that is extended at regular intervals on the basis of an individual’s performance. Salary is
generally a fixed amount of package calculated on an annual basis. When divided by a number of
months the amount to be disbursed monthly is ascertained. The same is given to the employee on
the basis of his productivity.
An employee is supposed to work for certain fixed hours daily but if Sometimes the work is not
finished in time the employee has to devote his extra time without any additional pay. An
employee is entitled to leaves, perks, and benefits, i.e. salary will be given if an employee has
availed a leave and didn’t turn up for the work.
Salaried persons are generally said to be doing “white collar office jobs” which implies that an
individual is well educated, skilled and is employed with some firm and holds a good position in
the society.
Definition of Wages
Wage is termed as a compensation that is given on the basis of the amount of work done and the
hours spent in doing that. Wages are variable and do vary with day to day functioning of an
individual. Wages are given to labors who are engaged in manufacturing processes and get the
compensation on a daily basis.
Labor is paid on the basis of hours and in order to increase the pay extra hours have to be
devoted to fetch more.An individual is paid for his presence, not for his absence i.e. in case a
person do not come for the work he will not be paid for that day.
Generally, the waged person are said to be doing “blue collar labor job” which implies that an
individual is engaged in the unskilled or semi-skilled job and is drawing wages on a daily basis.

16. Conclusion
In the national accounts, in accordance with the System of National Accounts, wages and salaries
are the sum of remuneration paid to employees, including the values of any social
contributions, income taxes, etc., payable to employees. For administrative convenience, or due
to a legal requirement or some other reason all or a part of such payments may actually be
withheld by the employer and paid directly to tax authorities, etc., on behalf of the employee.
However, labour-related expenses of a business, such as payroll taxes, pension fund
contributions, social insurance schemes, workers compensation insurance, etc., are not counted
as wages and salaries for national accounts purposes. Similar concepts apply to general
accounting treatment of labour expenses.