Wages are the monetary compensation an employee receives for their work.
An employer pays their employee wages based on their agreed-upon rate and the total time the employee has worked.
Wage vs. salary
Wages are the hourly, weekly, or monthly amount an employee is paid. Wages are calculated by how many hours the employee worked during a pay period. Wage employees usually clock in and are eligible for overtime compensation.
By contrast, salary is the fixed annual amount of compensation an employee receives. Salaried employees receive a fixed amount for each pay period, regardless of their work hours.
A salary also includes statutory benefits, such as social security and health insurance. Salaried employees maintain the same fixed rate and are typically not eligible for overtime pay.
Income vs. wage
Wages are payments based on the employee’s work completed during a single pay period, whereas income represents the employee’s total earnings for the year.
How do you calculate wages?
An employer calculates an employee’s wages by multiplying their employee’s hourly rate by the number of hours they worked during the pay period. An employee’s hours are usually tracked on a timesheet or through an online time-tracking system.
To maintain payroll compliance when calculating wages, employers must also factor in taxes, other payroll deductions, and any overtime hours a wage employee completes.
How are wages paid?
There are numerous ways employers pay their employees wages. Some of the most common methods to pay wages include:
- Once a month. The employee receives 12 paychecks a year.
- Semimonthly. The employee receives a paycheck twice a month, totaling 24 paychecks a year.
- Biweekly. The employee receives a paycheck every other week, totaling 26 paychecks a year.
- Weekly. The employee receives 52 paychecks a year.
What are examples of wages?
There are several examples of wages, including:
- Hourly wage. The amount employees receive based on the number of hours they work. Employers commonly pay hourly wages to part-time employees.
- Minimum wage. The lowest legal amount of money employees can receive for an hour of work, as determined by local employment law.
- Living wage. The theoretical minimum amount of money an individual can live off of to support basic necessities, such as shelter, food, and water.
- Fair wage. The acceptable amount of money an employer should offer their employee based on location, cost of living, and competitive market rate for the employee’s role.
- Real wage. The amount of money an employee receives after adjusting for inflation.
- Prevailing wage. The wage employees receive when contracted to work for a government agency. This method is commonly used with civil engineers, urban planners, and construction supervisors.
- Supplemental wage. Additional income an employee receives on top of their regular monthly wages, such as bonuses, overtime pay, commissions, or vacation pay.
Minimum wages around the world
Employees have the right to earn a minimum wage in most countries. However, minimum wage laws and rates vary by country.
Some countries that offer the highest minimum wages in the world include:
- New Zealand. The monthly minimum wage is US$14.21 (NZD 22.70) per hour for employees 16 years and older, or about $2,387 (NZD 3,814) per month.
- The Netherlands. The monthly minimum wage is $2,152 (EUR 1,995) for employees 21 years and older.
- Germany. The monthly minimum wage is $2,144 (EUR 1,987).
Some countries that offer the lowest minimum wages in the world include:
- India. The monthly minimum wage is $65 (INR 5,340); however, minimum wages vary based on skill set and place of employment.
- Pakistan. The monthly minimum wage is $112 (PKR 32,000).
- The Philippines. The minimum wage varies by region, ranging from $5.49 (PHP 306 per day in the BARMM region to $10.22 (PHP 570) per day in the National Capital Region.
Countries like Denmark, Finland, Iceland, Singapore, and Italy don’t have statutory minimum wages. Instead, employers typically set wages according to collective bargaining agreements or union regulations within their sectors.
Learn more in our guide to minimum wage by country in 2023.
Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation or accountancy advice from an appropriately qualified professional. © 2023 Velocity Global, LLC. All rights reserved.