The term 'Salary' is included in the Accounting edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
Salary refers to the monetary component of a job’s arrangements. Companies provide this as compensation for employees delivering specific services in their capacity on the job. The figure usually pertains to the amount of money the employees receive for a year’s worth of work. It is also the amount of money which the workers earn in regular pay intervals, such as weekly, bi-weekly, or monthly pay periods. Such payment arrangements are commonly negotiated between the employee and employer when the working relationship begins. Salary details and agreements will often change with time and experience on a job.
Employers make the determination on offering a salaried job to a prospective employee. The individuals only provide their consent to such a role. After they begin the new job, such employees will typically be required to work a bare minimum number of hours every work week. This form of compensation is not reliant on how many hours the employees work on a weekly basis. Instead it relates to an employee successfully completing expected work tasks every week and month. In order to hold on to such a salaried position, the workers have to measure up to minimum performance standards and periodic reviews.
One thing salaried employees can count on with a high degree of certainty is that their supervisors will expect them to do more work when required. The United States is particularly concerned about how many hours employees have to work. The Congress passed the Fair Labor Standards Act to ensure that all by the hour employees receive overtime pay as appropriate. This however never applies to employees who are exempt.
Exempted employees are those working in executive, administrative, and professional level positions. Many computer and sales employees are also exempted from the overtime pay requirements. Exempted employees have to receive a minimum amount of weekly compensation, receive the identical salary even when they work a different amount of hours, and provide certain services and fulfill particular duties.
Those employees unfortunate enough to be considered exempt from this Fair Labor Standards Act will occasionally be expected to work late at night or weekends, and all without receiving additional pay. Wise employers realize that keeping such hard working employees motivated in these scenarios requires special incentives. Among these are end of year financial bonuses and holiday allowance and pay. Other employers will provide “comp time” a compensation-based time arrangement that rewards those employees who work on a Saturday with another day off in the next work week.
Many employers which can afford to do so will decide to raise their better performing employees’ salaries from time to time. These pay increases commonly come after an annual, semi-annual, or quarterly performance review which will typically be conducted by a member of the management or the principal management team and the employee. Companies realize that hard working and effective, talented employees need raises in order to ensure they do not switch jobs for better opportunities at another company and to tangibly reward them for a job well done.
A number of positions at firms have pre-determined salaries arranged. Yet a highly qualified individual will generally be able to negotiate a higher salary. Qualified employees can similarly negotiate raises in salary, particularly in cases where additional work or responsibilities have been delegated to an employee.
Salary should never be confused with wages. Pay that employers provide based on the quantity of hours which the employees work is called wages. These employees are compensated for the numbers of hours they actually work. They also have the advantage of generally receiving overtime pay for putting in extra hours than those which are typically expected in a given work week.
While wage employees have the advantage of earning overtime pay, salaried employees often receive special benefits unique to this form of compensation. Among this is paid vacation time and paid sick day accrual. Sometimes wage or hourly employees will be moved up to salaried positions once they have proven themselves effective workers for the company.