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What is a Salary?

Malcolm Tatum
Updated May 16, 2024
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A salary is part of a compensation package that employers provide to employees in exchange for performing specified services. Generally understood as covering one year's worth of services, it's the money an employee earns at regular intervals — often monthly, semi-monthly or even weekly — throughout the year. Payment terms are typically agreed on between an employer and employee at the beginning of the working relationship, although the details can be changed over time.

While an individual must agree to being a salaried employee, it is the employer who decides whether to offer this position to a worker. Once hired, these employees may need to work a minimum number of hours each week, but compensation is usually based on more than just the time spent at the office. To maintain their positions, employees must typically continue to meet certain performance standards.


Salaried employees may be expected to contribute more work than usual at times. In the U.S., a law called the Fair Labor Standards Act guarantees that all employees are entitled to overtime pay, but it doesn't apply to those who are considered "exempt." Exempt employees include those in professional, administrative, and executive positions, as well as some sales and computer workers. They must also earn at least a certain amount each week, perform certain types of duties, and get paid the same salary even if they don't work the regular number of hours.

For exempt employees, this might mean that they sometimes work weekends or late into the evening without any extra pay. Some employers might offer incentives, such as holiday or year-end financial bonuses, to keep employees who are working especially long hours motivated. Compensation time, sometimes called "comp time," may be offered as well, so an employee who comes in on a Saturday to meet a deadline, for example, might get to take a day off during the following week.

Distinguishing between exempt and non-exempt employees is not always easy, and some employers try to classify as many workers as possible as exempt to save money. An employee who is regularly asked to work overtime and thinks that he or she might meet the criteria for overtime pay may want to speak with the human resources department of his or her company or to an employment attorney or other labor law professional.

Pay Increases

Employers with the resources to do so may decide to increase a worker's compensation periodically. Raises and promotions are usually issued following an annual performance review between a management executive and an employee, although they could occur more or less frequently. A talented employee who is performing particularly well, for example, might be offered a raise to encourage her to continue to do good work and to keep her happy with her job.

Although some positions come with pre-set salaries, it's often possible for an individual to negotiate. Some employment professionals suggest that, when an applicant is offered a job, he or she should always try to negotiate for more money, in part as a way to show the new employer that the individual has done research on the position and knows his or her worth. Raises can also often be negotiated, especially if a position has been changed and new responsibilities added.

Although it's relatively uncommon, salaries for individuals, departments or the entire company can, in some cases, be reduced if a regional economy is slowing dramatically or an employer is experiencing severe financial hardship. It may be better for the employees to take a — hopefully temporary — pay cut to keep the company going through the hard times than for some or all of the workers to lose their jobs.

Salary vs. Wages

While "salary" may be the accepted term for any and all compensation that employees earn, it is not always an accurate reflection of someone's earnings. Income that is earned first and foremost relative to the number of hours worked is considered a wage. A wage employee is paid specifically according to the number of hours he or she works, and he or she is nearly always entitled to overtime pay for working more than the required number of hours each week.

Salaried employees, however, are often given certain perks that may or may not be given to wage employment. For instance, they can usually accrue sick days and vacation time that allow them to miss some work and still be paid. Not all hourly positions provide those types of benefits. Also, having a consistent, regular paycheck often makes it easier to create a budget. With wages, the income amount may vary from one pay period to the next.

It is not uncommon for employees who join a firm as an hourly employee to be moved into salaried positions. This might happen after a predetermined trial period of several months, or it might be a way for an employer to keep hold of a strong talent. Considering that salaries require more of a financial investment in employees than wages do, the former tends to provide more prestige and job security.

Broader Compensation

Often, a salary is part of a broader compensation package — one that extends to include both retirement and health-related benefits. In fact, some employers will use benefits as an incentive for talented workers when they can't offer them a higher base pay. Another tactic that some employers use is to offer employees stock options, which represent the right to buy equity shares in a company at a discounted price. This has the added incentive of encouraging both productivity and loyalty, since an employee who is financially invested in the company likely wants to see it succeed.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Discussion Comments

By anon351734 — On Oct 16, 2013

I work for a non profit and we agreed on an eight month term. I get my first paycheck and it's way less then I figured out to be. Come to find out, my pay is for a year salary. Is that legit even if I only agreed on an eight month term? Shouldn't I be getting paid my amount for eight months and not 12?

By anon349542 — On Sep 27, 2013

I am a night person at a motel and I recently was given a choice: either your boyfriend goes or else you're fired. I work seven days a week, from 5 p.m. to 9 a.m., and I only get paid for two hours of that time. The rest is in lieu of rent. My cost of living is $700 a month.

They recently just put a no trespassing order on my boyfriend, so now he's sitting in jail. My address is completely different from what listed on the orders. Can they do this? He has been living with me for well, almost a year now. What rights do I have? I am torn because I have a son who needs a home and I really don't have anywhere to go. This isn't right. My job duties aren't lacking. I have never had a complaint about myself or my family. The owners and my manager don't even know him. They are judging him from what they have heard from the housekeeper. Please help me.

By Hayley22 — On Aug 06, 2013

Salary is compensation or a payment whether periodical, for regular service or for a specific service. Surveys collecting information about employee compensation, including salary and benefits, are commonly called salary surveys.

Many organizations want to use salary surveys to set the compensation levels for their organizations. Unfortunately, it's not always as easy as reading a survey and using the information.

By anon340430 — On Jul 03, 2013

Are there any guidelines for establishing commission pay for a salaried employee in Colorado?

I am a salaried employee in Colorado. Recently my employer reduced my wages by 40 percent. He stated that I will be paid commission to compensate me for the decrease but has not done so and is evasive about outlining the commission criteria.

By anon333195 — On May 03, 2013

I work in a jail, I am on salary and I have had to work multiple extra hours to cover a position they haven't filled. I have twelve hour shifts and work nights. I am doing more than 50 hours weekly if that is what they base it from, but I don't get any compensation. Is this fair?

By anon308642 — On Dec 11, 2012

I manage a restaurant and a gas station and I was not trained for it. I have expressed my concerns about not being trained and have been ignored.

I work 90-127 hours a week and am paid $8.00 a hour for 50 hours on salary. When I took this position they said I would not have to handle gas and I would be compensated for anything I work over 50 hours. I have yet to see a dime even though I have fought tooth and nail for it.

I clock in and out and I have my time cards. I have informed my district manager who makes all these promises that I need to spend time with my child and he asks me to work more. Is this legal? I didn't agree to any of this. I have also been told that I am ugly and need to fix my hair and makeup that I should lose some weight and wear a shirt that was given to me by my boss that is too small and it is a button up so the buttons come undone all the time.

I was harassed and threatened that I would be replaced if I did not work open to close and fix my appearance. I work in fast food constantly working on our fryers and any makeup would break my face out. Can they ridicule me this way? Please help.

By anon307729 — On Dec 06, 2012

I just don't understand this salary pay. I'm salaried but don't sick or overtime pay. I work 39 hours one then 36 hours the next but if I'm late, they dock me money.

By anon302500 — On Nov 09, 2012

I'm being paid $800 per month and work hours are 9-5 (and as needed) also required to live onsite. Question is, are they required to pay at lease minimum wage per hour rate? (Florida)

By anon300326 — On Oct 29, 2012

I am in a situation that I feel is unfair. I am being incentivized by my company to make 12 calls per day rather than eight calls per day in order to earn a bonus. I have no issue with that in and of itself, but the territory I live in has vast amounts of drive time and I physically cannot make 12 calls per day due to the size of my territory.

Is there anything illegal about this? They are calling this bonus a kicker, and I feel discriminated against. I cover an entire state whereas others only cover a small segment of a city. Any advice?

By anon296545 — On Oct 11, 2012

I am considered salary at a company here in Kentucky. I needed to take a day to attend the funeral of my wife's stepfather and was docked a day of pay because HR ruled that "spouse's step parents" are not included in bereavement. Is this legal for them to do this to me?

By anon253524 — On Mar 09, 2012

What is the minimum number of hours worked per week in Florida to receive company-paid benefits?

By anon231263 — On Nov 23, 2011

Unfortunately, more often than not, you will end up losing out on a salary, but how can you say that getting paid the same every month isn't a perk?

My salary is based on me doing 50 hours a week, but yet I get paid the same when I'm only doing 40 hours a week. It's peace of mind knowing that when you hit quiet times at work you still get paid the same amount.

If you don't know what a salary is before you take the job, then that's not the employer's problem. It's up to you as employees to find out exactly what the job entails before you take it and decide if it's right for you. Don't take the job and moan because it wasn't quite what you was expecting.

There are rules and regulations in most work places and if you feel you're being hard done by, then talk it through with the manager and if that doesn't work, well you took the job! And yes, some months are long and you get paid the same, but you are on salary. You accept the pay from the employer to get paid a set annual pay and it's broken down for you over 12 paydays.

It's not about how many hours you work. You should really look into what a salary is before you accept a job offer or salary.

By anon192135 — On Jun 30, 2011

We need answers to the questions above. This salary word, employers take advantage of it, and there should be a law. Getting the same amount week after week is not a perk. There is no justice when they pay you $500 a week and expect you to live at work, and still be available when needed, when? When I'm sleeping at home? I worked like that, and bonus? I didn't qualify. The bar was too high. Vacation/sick days? Same waiting time as an hourly employee. These practices need to be investigated and end modern slavery.

By anon185596 — On Jun 12, 2011

anon178130: Yes, that is illegal. The minimum overtime wage is 1.5x your normal pay. So you should get $688 per week instead of $640. So it's not a whole lot more, but it's still illegal and every dollar counts.

By anon178130 — On May 20, 2011

I work 64 hours a week for a condo association in Orlando, Florida. I am making $10 an hour. It looks like I am on a salary. Is it against the law to not be paid more for my overtime?

By anon151022 — On Feb 09, 2011

for anon100691: Yes it is. they have to give you at least a week's notice before they lay you off.

By anon101300 — On Aug 02, 2010

My husband works in TN and is paid as salary. With that being said, he is working more than 12 hours a day, 5 days a week (with the same pay). Are there any laws on how many hours you can work for that salary pay? I just find it very alarming and ridiculous that somebody can work that much, especially in the heat waves that we live in and there not be any laws against it.

By anon100691 — On Jul 31, 2010

i was laid off with my fellow workers with seven hours notice after five years. Is that legal?

By anon81104 — On Apr 29, 2010

I work in the automotive industry, and I am a salary employee. Due to hard times and a decrease in business, I have recently been told that my hours are cut back. As I am a salary employee, do they have the right to cut my pay? I was under the impression that, since they don't pay me overtime or PTO when I work over or I am sick, that they wouldn't be able to cut my pay? Please advise.

By anon76192 — On Apr 09, 2010

My wife is a salaried employee. She had time taken away from her for having to leave work early. She does not have any pto or vacation time. The problem is she is forced to work hours outside of the normal business hours with no compensation or comp time. Is this legal?

By anon74526 — On Apr 02, 2010

I am salary and a manager of a HIM department at a hospital that is open 24 hours. Our department is open Monday through Friday 6 a.m. to 5 p.m.

I wanted a day off during the week for a doctor's appointment so I came in on Saturday and worked over on Monday. I e-mailed the director to let her know. She said I couldn't do that and I had to use personal time to cover the day off.

The next breath was that she was taking work home and left early. I am steaming. This seems very unfair. What should I do?

She also said that she knows other departments run their payroll differently.

By anon67226 — On Feb 23, 2010

Is unpaid earned commissions and unpaid stock options grounds for a lawsuit? I also need to know how many complainants make up a class action lawsuit? Thanks to anyone who can answer these questions although I'm pretty sure The first answer is yes. The second question is a mystery.

By anon47938 — On Oct 08, 2009

I have worked for the same company going on six years. i started out as an hourly wage, with time and a half for OT, and a written policy of sick, personal and vacation days based on length of service. After four years, with rate increases, the manager was fired and I was offered a salary with written terms for vacation and sick time. As it seemed in my best interest at the time, I took the offer. This offer was extended by the owner. A new person took over policies and procedures and revised sick, vacation and personal into PTO time, which she fails to keep track of through our payroll system. Anyway, after 16 months of 50-plus hours a week, numerous phone calls after hours from the owner, and interference with the most important part of my position to create reports that were not even reviewed, I went to my boss and stated I no longer wanted to run the entire department, that what I do best is something else and since I had no real authority to hire or fire (another person did that without my input) I felt like I was not allowed to run the department as I felt was most productive. After negotiation, I took an offer of piece work, plus a base pay that was substantially less than what I had been paid, but the piece work evened out the final number. The one hedge was the cacation and sick time I had been contracted to be entitled to due to the years I had with the company. We compromised on the new "PTO" policy, but at the hourly rate I had been paid before. I lost in that one, but its a tough job market, and I need a job. Well today, I was told that the are revising and cutting back on PTO, and that it was not in writing yet, but it would mean less than the policy currently was. Also, medical benefits, that were promised to be covered by the employer in full, are going to change once again, with the employee contributing more. To me, this seems like I have taken a pay cut after pay cut. I was told if anyone didn't like the new policy when it comes out, then there's the door. I was once told in the state of Florida, "benefits" are a contract between employee and employer, and the Department of Labor does not get involved in things like that - is that correct? I do not wish to quit, even though the second in command would love for me to do just that, as the hostility radiates off of her when we need to interact, but is there any other recourse that can be done?

By anon45449 — On Sep 16, 2009

i work for a dentist's office. I am the office manager and i am on salary. Recently my boss decided to close every Friday and reduced my salary, while everyone is still getting paid hourly for each day they work. I am only getting paid less the Friday. Is this correct?

By anon43035 — On Aug 25, 2009

all of you should call you state labor relations department.

By anon40210 — On Aug 06, 2009

I am a manager of a large department and being asked to fire an employee who has come back from disability for 2 months *and* the owner has passed down through the other owner who told me to write her up to fire her..."she is a liability". I feel extremely wrong and need assistance.

By anon39099 — On Jul 30, 2009

If i was given a retention bonus to stay until my job ended. Does that bonus count as a severance or a separation bonus?

By anon28138 — On Mar 11, 2009

I get paid by salary. On a typical pay period I work 80 hours, but when the month is long I may work up to 96 hours. Why do I still get the same pay when I work 96 hours as I do 80. If I miss a day when I do have the long pay periods I get paid less. Is that legal?

By anon18285 — On Sep 18, 2008

Mike, check with your state's Wage and Hour Board or department of Industrial Relations (whichever is present in your state government structure). They can tell you exactly what is and is not allowed, based on whether you are classified as a full time employee or as an independent contractor.

By mikevwvu — On Sep 18, 2008

I live in West Virginia. When I got the job I have now I agreed to be paid once a month. I get paid on the 1st of every month. I agreed to be paid $10.50 per hour at 173.3 hours a month. However I went to a trade show and had to put in 42 hours overtime. I never got paid for it. Is that legal?

By anon17158 — On Aug 23, 2008

I was told that because I am salary I have to put in no less than 40 hours a week and if I do not it will be taken from my sick/personal time. However, I could work 50 hours a week for weeks on end with no comp time. This also includes business trips, which can take me away from home for up to 4 days at a time, and it is still considered 40hrs only. I do not have a problem doing my share of work, however this just does not seem right to me. Is this lawful?

By mdt — On Mar 13, 2008

You don't mention if you are working in a unionized situation or where you live. Both of these factors can impact the answers to your question. A good place to begin is by looking at the laws that govern the setting of salary and wages in your area. For example, how many hours per week does your jurisdiction require in order to be considered full time? Does this law impact both salaried and hourly personnel? Knowing the laws that your employer has to follow will help a great deal.

By abyrdhunter — On Jan 30, 2008

I would love the answer to this question also. As it is happening to me right now. I'm new here and not sure how this works. I don't see any answers posted on here have there been any yet?

By anon5334 — On Nov 21, 2007

I was approached by a question by one of my employees; How can you decrease my pay if i work under 40-hours and i am a salary paid employee? What's the point of having sick and personal days if all of the hourly and salary employees are paid the same after 90-days? We don't have a complete salary policy, so if i could get some advice, I would greatly appreciate it. Thanks. Michelle

Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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