For many people, the use of the term salary has to do with the reception of any type of regular payments from an employer to an employee. While this is close to the mark, it is not quite true. Technically, a salary is an agreed upon amount of pay that is to be extended at regular intervals, in exchange for the competent performance of specific tasks within the workplace. Here are some of the distinguishing characteristics of the salary that set it apart from other forms of remuneration.

In many countries, salaries are based not on the number of hours worked, but on general job performance. Thus, a salaried employee may be expected to put in a minimum number of hours, but also be available if extra work is needed. In cases where the job salary remains the same no matter what hours are worked, the employer does not provide overtime pay, although some employers do reward employees on salary with a bonus at some point during the year. However, the point is that most employees who have agreed to receiving pay for their services by way of a salary are not generally subject to overtime laws regarding employment conditions.

While many people refer to any type of pay as a salary, the fact is that the proper term to use when the pay is based on a per-hour rate is a wage. Unlike the salary, an employee that is paid a wage typically can expect to receive extra pay when working more than the standard number of hours per week. Wages can include regular pay for hours worked, along with time and a half pay for any other hours worked above the usual and standard workweek. Some companies will pay double the normal rate in wages when asking the employee to work on holidays and in other situations.

Being on salary usually also includes some perks that may or may not be applicable to wage related work. For instance, salaried positions usually accrue sick days and vacation days that may be used when needed. Not all hourly positions provide those types of benefits. Second, being on a salary means that you always know what amount of money is coming into the household. With a wage, the amount may vary from one pay period to another.

While the salary approach to employee compensation is often the most sought after form of payment, the fact is that there are many wage related positions that pay as well or even better than some salaried positions. Depending on the career and personal goals of the individual, one model may emerge as being both more desirable and practical for a given situation.