What is a Wage?

A wage is the remuneration paid to an employee, usually on an hourly, daily, or piece rate basis. Wages are one of the primary expenses of an organization, comprising an especially high proportion of total expenses in service-oriented firms. Wages are more likely to be paid for unskilled or manual labor. A wage differs from a salary in the following ways:

The total amount paid tends to vary, based on the number of hours worked, whereas a salary is a fixed amount, irrespective of the number of hours worked.
Wages tend to be paid more frequently than salaries, usually on a weekly basis.
Wages may be paid in cash, especially when wages are being paid on a daily basis or to temporary laborers.
Someone being paid a wage is more likely to also receive tips or gratuities from customers, which is rarely the case with salaried employees.

How Wages are Set

Wages may be set by regulation, union agreements, or market conditions. A common regulation is the minimum wage, which sets the minimum pay threshold that an employee must receive. A union agreement will specify exactly how much each pay position will be paid, as well as any escalation rates over time. Market conditions are the most common determinant of wages, where an employer must pay what is being offered by the competition, or else it will be unable to attract any workers.

Wages vs. Salaries

There are several differences between wages and salaries, which are as follows:

Basis of calculation. Wages are based on the number of specific hours worked, while salaries are paid at a fixed rate that is not directly related to the number of hours worked.
Overtime eligibility. Someone paid a wage is eligible to be paid overtime, while someone who is paid a salary is not eligible for overtime.
Variability of the amount. Someone being paid a wage may receive a different amount in each pay period, depending on the number of hours worked. Conversely, someone being paid a salary is always paid the same amount in each pay period.