Salary vs wage: What is a salary?
Salaries are negotiated fixed amounts employees get paid, usually calculated on an annual basis and paid monthly or bimonthly. Salaried employees can be full-time, part-time or casual employees.
For example, a management accountant’s annual salary of $96,747 is typically paid by their employer in 12 monthly instalments, amounting to a gross payment of $8062.25 each month.
Advantages
- Eligible for bonuses, pay rises and promotions
- Qualifies for superannuation
- Entitled to paid leave and sick leave
- High level of income security
- Predictable payment dates
Disadvantages
- Less flexibility due to fixed hours
- No extra payment for overtime
- Risk of stress due to overworking to complete workload in set hours
- Must wait for company’s payment run to get paid
- Might need to be ‘on call’ unpaid
A salary is therefore a good option for workers who prefer to know in advance how much they’ll be paid each month, on what day, and who aren’t too worried about the risk of overexerting themselves.
Related: How to Communicate a Pay Rise
Salary vs wage: What is a wage?
Wages are calculated on an hourly basis and paid to workers at the end of each pay period for the actual hours they worked, typically on a weekly basis for the time worked the previous week. Most wages are covered by the Australian Government’s industry awards. It is the employer’s responsibility to ensure that their waged workers receive the correct remuneration based on their industry and award.
For example, if a part-time server works 25 hours during their working week at the applicable Restaurant Industry Award rate of $22.75 an hour, they will take home a gross wage of $568.75 that week. But if they work 30 hours the following week, their gross wage will be $682.50.
Advantages
- More regular payments on a rolling basis
- Ability to earn more if more hours are worked
- More autonomy due to less-restrictive agreements
- Pay more accurately reflects actual effort put in
Disadvantages
- Leave is generally unpaid
- Irregular payment cycles
- Lost shifts may lead to lower income
- Little or no benefits such as superannuation or perks
Roles paying wages may appeal to workers trying to earn money alongside their studies or other individuals who don’t need to rely on a fixed regular income, for instance, to pay off a mortgage.
Related: A Guide to the Minimum Wage for Australia
Which is better, a salary or a wage?
There’s no clear-cut answer to this question. As we have seen, both salaries and wages have their advantages and drawbacks. While a salary is a fixed payment that is paid out to your workers for each defined pay period, a wage is more flexible and depends on the number of hours worked by your team members in each pay period.
For your staff, this means that a salary offers greater income stability and therefore greater security, as they will always know in advance exactly how much they will get paid. Naturally, the same goes for you as an employer – you will always know your salary expenses in advance, so you can budget more precisely. What’s more, employees on a fixed salary generally don’t receive overtime payments, but they do enjoy benefits such as sick leave or bonuses.
Wages, on the other hand, may be the preferred payment option for workers who like to remain flexible and work more hours one week and fewer the next. Of course, in turn, they forego the security a salary offers and typically get fewer benefits. On the plus side, wage earners get paid more if they work longer hours. Also keep in mind that most professional roles are salaried, while manual or semi-skilled labourers or administrative staff are more likely to be paid a wage.
These considerations are something you will need to bear in mind when deciding whether to opt for roles with salaries or wages, or a combination of both, in your organisation.
What do wages and salaries have in common?
Both wage-based and salaried employees are subject to the same requirements when it comes to record-keeping. The following is an overview of your obligations in this respect:
- Payslips: You must issue payslips for all your workers; these have to include your company’s name, the employer’s name, the payment period and date, the gross and net amount as well as either the hourly pay rate and number of hours worked for waged staff, or the applicable superannuation contributions for salaried staff.
- General records: These contain each worker’s details, commencement date and employment type.
- Pay records: Detailing the agreed pay rate, frequency and any applicable bonuses or loadings.
- Leave records: Recording any leave taken, whether sick, paid or unpaid.
- Hours worked records: Agreement on amount of hours to be worked, the start and finish times, as well as any overtime worked for eligible workers.
- Benefits records: Detailing when, how much and to which fund superannuation was paid by the employer.
- Termination records: Noting whether the employment was terminated by consent, by notice, summarily or in some other manner, if and how much notice was given, and the name of the person who terminated the employment.
As you can see, although there are some significant differences between salaries and wages, both types of employee are subject to similar record-keeping requirements. As an employer, it is your responsibility to stay informed and make sure you are complying with all legal requirements to avoid finding yourself in hot water.
Related: Short Wage Subsidy Guide for Employers
Now that you’ve learned about the difference between a wage and a salary, and the implications of either choice for you as an employer, you’ll be ideally equipped to make the most suitable decision when hiring staff for your business. It may be useful to check in with your HR team regularly to make sure they are all up to date on the latest regulations for wage and salary payments, and that they are paying your staff the correct amount and any applicable benefits.
Finally, remember that not all workers may be familiar with the ins and outs of the differences between salary and wage. When you hire someone, go through the payment process for the role they’re applying for with them to make sure they understand whether they’ll be receiving a salary or a wage. You should also ensure that your workers are clear on the advantages and drawbacks of each, especially regarding overtime and benefits, so they can make an informed decision – just like you.
Read more: Visit our Hiring Resources for Employers page when you’re ready to start recruiting.
