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What are Cash Wages?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 04 November 2016
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Cash wages are compensation for labor provided in the form of cash, checks, money orders, or direct deposits into employee bank accounts. This contrasts with non-cash forms of compensation including in-kind wages, stock options, and provision of benefits like health care. Many employees worldwide receive their compensation in the form of cash wages.

When an employer provides cash wages to an employee for work, the wages paid must be reported to government authorities. The employer is required to follow minimum wage laws, paying an employee at least minimum wage per hour for the work completed. Employers are required to disclose how much they are paying to employees at the time of hiring and there are laws pertaining to situations where wages can be withheld or otherwise changed without prior agreement. Employees in turn are expected to pay taxes on the cash wages they earn.

Typically, cash wages come with a statement providing a breakdown of the wages. People who are receiving salaries will see their salary information on that statement, while hourly employees can see how many hours of work they are being paid for. The statement discusses any withholding, including voluntary withholding such as payments into retirement plans or shared insurance plans. In addition, if wages are being garnished by court order, this must be disclosed on the statement.

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If there is a dispute about the amount paid, such as a belief that an employer did not calculate hours correctly or that the rate of compensation disclosed on the statement is not correct, the employee can bring up the discrepancy with the employer to rectify the situation. If the employer does not respond or fails to resolve the situation satisfactorily, the employee can report the issue to a government agency that oversees the rights of workers. The agency can investigate the situation and assist the employee with recovering the compensation he or she is entitled to. Filing a case in court is sometimes necessary.

There is a common misconception in some regions that receiving payments in cash is not legal. This is the result of confusion about so-called “under the table” compensation, where employers provide payments to employees but do not report them. This compensation is most often provided in the form of cash because it cannot be traced, making it difficult to identify and prosecute people who make under the table payments. Paying in cash is not itself illegal, as long as the payments are reported.

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