A salary is essentially a type of monthly payment from an employer, usually to an individual, that can be defined in an employment agreement. It is compared with hourly wage, where every project, hour or unit completed is paid on a daily, weekly or monthly basis. This means that one’s salary amount is decided only once and then paid for the entire period that applies. In some cases, some employers also pay their employees for their part-time work, when they meet specific requirements. This type of arrangement is called benefit-based salaries.
Benefits such as health insurance, life insurance and pension are excluded from normal salary calculations. Most employers decide the amount of the salary by considering four factors: the length of the employee’s service, the productivity of the employee, the cost-effectiveness of the employee’s workplace and the profitability of the employer. The first two criteria (the length of the employee’s service and his/her productivity) consider the likelihood of turnover, while the third (the cost-effectiveness of the employee’s workplace) considers the profitability of the employer. Sometimes, some employers also consider the cost of providing benefits for their employees before paying them salaries.
Usually, a typical employee is paid an hourly rate, with no statutory increases or decreases permitted. If an employee wants a rise in his salary, he has to apply for a review. However, there is no legal obligation for an employee to pursue a review if the employer does not comply with the legal obligations to provide annual increases or decreases. However, most companies still require regular reviews of an employee’s performance by the supervisor or a designated manager.
Some employers also allow their salaried employees to be paid a higher base salary plus a bonus at the end of the year. In such cases, the salary of such employees is subject to change as per the rules of the company. While overtime is not allowed in some cases (such as when an employee works more than 8 hours in a single day), salaried employees cannot be required to work overtime without their consent. However, an employer cannot deny an employee the right to bargain for incremental increases in the base salary or bonus.
A common practice in some countries is to pay employees a salary that is lower than the prevailing minimum wage, but still above the national minimum wage. However, an employee cannot expect an increase in his hourly salary above the amount that the law allows if the same is not allowed for another employee who also receives a higher bonus at the end of the year. For employees working under this condition, the contract may specify that an increase in the base salary or bonus cannot be made without their consent.
Under certain circumstances, an employee may also be entitled to receive payment for an accidental fall or injury outside the premises of his place of work. The term ‘excluded’ in the clause of a contract does not mean that the employee will never get any compensation for such an accident. It simply means that the accident has been averted from happening. In such a case, the term ‘salaried employee’ refers to the employee who would receive a fixed amount for the accident.