Wages vs Salary

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WAGES Vs SALARY


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INTRODUCTION

Most people begin their work life earning anHourly Wage. A Salary is not offered unless

and until you have achieved a certain level ofexperience and skills in the work world.

Which explains why there seems to be a

different degree of "status" that goes alongwith the two different payment methods. Butthat's not really true -


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Neither position is any less or more

important than the other. In fact, eachsupports and depends on the other. Andthey're both important to the success ofany business.

And as with most things in life, there arepro's and con's to both of these paymentmethods.


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WAGES :

WAGES Rule 22 (2) of the Minimum Wages(central) Rules defines "wages" as under Wagesshall mean all remuneration payable to anemployed person on the fulfillment of the

contract employment and includes HRA. Itexcludes (i) The value of rent freeaccommodation, supply of light, water, medical,

(ii) Contributions paid by the employertowards the PF or any scheme of socialinsurance.....


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(iii) Traveling allowance / Traveling

concession (iv) Gratuity The wages mayconsists of (i) a basic rate of wages andspecial allowance called the cost of livingallowance (ii) a basic rate with or

without cost of living allowance plus anyconcession on the supply of essentialcommodities.


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SALARY

"Salary" is the remuneration received by or accruingperiodically to an individual for service renderedas aresult of expressed or implied contract.

Compensation or remuneration even in the followingcircumstances is chargeable to Income-tax under thehead 'Salaries': -

a) When due from the former employer or present

employer in the previous year, whether paid or not. b) When paid or allowed in the previous year, by or

on behalf of a former employer or present employer,though not due or before it becomes due.


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c) When arrears of salary are paid in theprevious year by or on behalf of a formeremployer or present employer, if notcharged to tax in the period to which itrelates.

It is, therefore, clear that apart fromcurrent years salary, even advance salaryand/or arrears of salary maybe taxed in

the year of receipt.


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More specifically and elaborately, theIncome-taxActhas stipulated that salaryincludes :-

a) Salary, including advance/arrears ofsalary;

b) Wages;

c) Fees;

d) Commission;

e) Pension;

f) Annuity;

g) Perquisite;


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Receipts from Provident Fund chargeable totax; Profit in lieu of or in addition to salaryor wages; Gratuity;

Contribution of employer to RecognizedProvident Fund in excess of prescribed

limit; Interest on credit balance ofRecognized Provident Fund in excess ofnotified rates;

i) Encashment of leave. definition of 'salary' is inclusive and

notexclusive.


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SALARY vs. WAGES

Salary was given to people with white collar jobs andwages to blue collar one .

The total salary is: Basic Wages + D.A + otherallowances What a "Salary" looks like: $45,000 per

year.

What a "Wage" looks like: $16.50 per hour Wages arepaid to the direct labour, either in the form of time rateor piece rate (hourly or weekly basis) Salaries are paidto indirect labour, mostly in the form of time rate(monthly basis)


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MINIMUM WAGES:

The minimum wages fixed by government takesinto consideration the cost of living .

This is the wage which must provide not only for

bare sustenance of life but for the preservation ofefficiency of the worker- government committee onwages(1948)

Fair wages: fixed by employer determined on the

basis of : productivity of labor prevailing wage ratesin similar jobs level of national income and itsdistribution place of industry in the economy theemployers capacity to pay


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LIVING WAGE: HIGHEST AMONG THE THREE MUSTPROVIDE BASIC AMENITIES OF LIFE AND SOCIAL

NEEDS LIKE MEDICAL, EDUCATION, ETC - Atheoretical wage level that allows the earner toafford adequate shelter, food and the othernecessities of life.

The living wage should be substantial enough toensure that no more than 30% of it needs to bespent on housing. The goal of the living wage is toallow employees to earn enough income for a

satisfactory standard of living.


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COMPENSATION FACTORS:

Compensation management is about arange of interconnected processes thataim through both financial and non-

financial means to address whatemployees value in the employmentrelationship. The various factors affectingthe compensation and Wages are:

EXTERNAL FACTORS

INTERNAL FACTORS


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INTERNAL FACTORS

Productivity, Growth and ContributionPerformance/ Work Related Companys

Affordability & Budgets

Ability to Pay Corporate Strategies Business & HRM Organizational Values

Flexibility Responding to Changes


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Motivation Oriented Competence

BasedPerformance Appraisal

Organization Grade Structure

Job EvaluationRelative size of Jobs

Non Financial Benefits Employee

benefitsTrade Unions


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EXTERNAL FACTORS

Cost of Living & General needs of peopleemployed

Demand & Supply of Human TalentMarket Standards Industry Trends

State Legislations


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In the Innovative employee reward system thefeatures varies from industry to industry. But

the common features are :

1. Performance Appraisal System :Performance appraisal system is not only a

direct projector of performance by anindividual during the year but accounts for somany other parameters

2. Company commitment : If managementcommitment is not there , then innovativesystems will never come into existence.Business simulations if available may be triedto work out the nearest ossible results.


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3. Minimizing the Bias factor : Bias factor is a

stigma on innovative practices. You can noteliminate this but by minimizing the biasfactor , one can achieve the objective ofinnovative system.

4.Availability of resources : Forimplementation of any system one has tohave resources for the same.. If resources

are not available the morale which you wantto improve will not be as much possible asyou desire to be.


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THE END

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Wages vs Salary