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Home > Financial Maths > Salaries and Wages

Salaries and Wages

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

Examples of wage calculations

Overtime earnings

Bonuses, allowances and holiday loading

 

Also, there are other ways to earn income, and they are:

Piecework earnings

Commissions and Royalties

 

You can also learn about Gross and Net Pay as part of salaries and wages.