A salary is a regular type of payment from an employer to an individual, which can be legally defined in an employment agreement. It is compared with piece wages, in which every completed job, work hour or other unit is paid individually, and not on a regular basis. Hourly workers are paid at the end of the day; salaried employees receive their salaries after a given number of hours. The salary may also be scheduled according to a specific date, which is referred to as a payday. A salary may also be determined by an individual’s performance, such as the number of years worked with the organization.
There are certain differences between hourly and salaried employees. For example, most companies set their own minimum wages. These are usually higher for employees hired after a specific amount of time. Some companies offer training programs to help new employees understand the differences between hourly and salaried wages. Many employees prefer the former over the latter.
Hourly wage employees may also be paid less in some cases. The amount of the bonus may also depend on the company’s policy regarding bonuses. For example, some companies award yearly bonuses. This practice is often controversial, as it can give employees an incentive to work more hours, thus allowing them to receive more money per hour worked.
The difference between an hourly employee who receives a bonus depends on the terms of the contract between the two parties. In general, however, an employee who receives a salary will not receive additional compensation for any overtime hours he works. This differs from a commission system, in which overtime compensation is often times included. Some companies also allow for commission earning, in which a percentage of the total sales is set aside, then given to employees as compensation for their sales. This is typically done on a monthly basis.
Most salaried workers are entitled to a small part of their base salary, called the benefit package. Most employee benefits packages are made up of an annual salary, and some benefits include insurance plans, dental coverage, vision care, paid time off, paid holidays, paid sick leave, and retirement benefits. Depending on the benefits package, this portion of the salary may vary, though some benefits, like vision care, may not be taxable. If an employee does not earn enough in a particular year to earn a dividend, the employer is not legally required to pay that person’s full benefit. This benefit is called a prorated salary, and basically means that the salary earned each year is less than the prorated amount the company would owe them if the employee had retired that year and received their entire prorated annual salary. Both the prorated and annual salary are considered part of the executive compensation package.
Companies may pay their employees different wages for different reasons. Chief among these reasons are economic downturns, low demand for labor, and bad economy. Some companies still pay the same wages to employees who have been with the company for many years, regardless of economic conditions, as they feel it is important for the company to have a strong base of workers that have been loyal to the business over the years.