People can earn money in many different ways. The two most common ways are through salaries and wages. Those who work for an employer are usually paid a wage or a salary. Alternatively, you could be self-employed, and earn by charging a fee for your services or sell goods for a profit.
We will look at all these concepts in greater detail shortly. First let us look at the key concepts of salaries and wages.
Salaries
A salary is a fixed annual (yearly) amount paid to an employee. It is usually divided into weekly, fortnightly or monthly payments. A person who receives a salary is paid to do a job, regardless of the number of hours worked.
When calculating salaries, we need to remember the following:
| 1 year | = | 52 weeks |
| = | 26 fortnights | |
| = | 12 months |
Typically, salaries are paid to employees that work ‘full time’ for an employer i.e., those that are in continuous and long-term employment with an employer. Examples of professionals that earn salaries include teachers, government employees, police officers, accountants, engineers, etc.
Let’s look at a few examples of earning a salary.
Example 1 : Joe is a police officer earning $78,000 per year. Calculate Joe’s fortnightly salary.
There are 26 fortnights in a year. So Joe’s fortnightly salary
= $78,000 ÷ 26
= $3,000
Example 2 : Jenny is a teacher who is paid a weekly salary of $1527.35. What is her annual salary?
Since there are 52 weeks in a year, Jenny’s annual salary is
= 1527.35 x 52
= $79,422.20
Wages
A wage is money that is paid at an hourly rate to a person doing a job. In other words, a person’s wage is calculated based on the number of hours they worked in a given period.
Generally, wages are paid to employees that work ‘part-time’ or ‘casual’ for an employer i.e.,those that are not in a permanent or long-term employment. They may work at specific times or days or for pre-defined periods of time. People who earn a wage include waiters, supermarket check out persons, etc.
Example 3 : Tina is a part-time waitress at a local restaurant. She is paid $10.50 per hour. What is Tina’s wages in a week during which she works 22 hours?
To calculate the wage, we need to multiply the hourly rate by the number of hours worked.
So Tina’s weekly wages = $10.50 x 22 = $ 231.00
Example 4 : Tom works as a bartender 3 days a week. He is paid $12.35 per hour and works 20 hours a week? How much does Tom earn in a fortnight?
Tom’s weekly wages = hourly rate x number of hours worked
= $12.35 x 20
= $247.00
His fortnightly wages = 247 x 2 = $494.00
Here are some more examples of salaries and wages.
Examples of salary calculations
Bonuses, allowances and holiday loading
Also, there are other ways to earn income, and they are:
You can also learn about Gross and Net Pay as part of salaries and wages.