A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. Salary can also be considered as the cost of hiring and keeping human resources for corporate operations, and is hence referred to as personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.
A salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. Salary is commonly paid in fixed intervals, for example, monthly payments of one-twelfth of the annual salary.
Salaries are typically determined by comparing market pay-rates for people performing similar work in similar industries in the same region. Salary is also determined by leveling the pay rates and salary ranges established by an individual employer. Salary is also affected by the number of people available to perform the specific job in the employer's employment locale (supply and demand).
The total remuneration for work includes employee benefits and gross salary. After payment of payroll taxes the remainder is net salary or disposable income.
History
First paid salary
The first salaried work would have required a society advanced enough to have a barter system which allowed for periodic exchange of goods or services. Some infer that the first salary would have been paid in a village or city during the Neolithic Revolution, sometime between 10,000 BCE and 6,000 BCE.
By the time of the Hebrew Book of Ezra (550 to 450 BCE), receiving salt from a person was synonymous with drawing sustenance, taking pay, or being in that person's service. At that time, salt production was strictly controlled by the monarchy or ruling elite. Depending on the translation of Ezra 4:14, the servants of King Artaxerxes I of Persia explain their loyalty variously as "because we are salted with the salt of the palace" or "because we have maintenance from the king" or "because we are responsible to the king". other possibilities for the roots of the word could be the price of having soldiers conquer salt supplies and guard the Salt Roads (Via Salaria) that led to Rome. However, there is no ancient evidence for either of these hypotheses.
Roman empire and medieval and pre-industrial Europe
Regardless of the exact connection, the salarium paid to Roman soldiers has defined a form of work-for-hire ever since in the Western world, and gave rise to such expressions as "being worth one's salt". Compensation has evolved gradually moving away from fixed short-term immediate compensation towards fixed + variable outcomes-based compensation. An increase in knowledge-based work has also led to pursuit of partner (as opposed to employee) like engagement.
Salary surveys provide data on salaries for specific jobs throughout the market. Organizations may use salary survey data to develop and update their compensation packages. Individuals may use salary survey data in salary negotiations.
By country
Botswana
In Botswana, salaries are almost entirely paid on a monthly basis with pay dates falling on different dates of the second half of the month. Pay day usually ranges from the 15th of the month to the last day. The date of disbursement of the salary is usually determined by the company and in some cases in conjunction with the recognized Workers Union.
The Botswana Employment Act Cap 47:01 Chapter VII regulates the aspect of protection of wages in the contracts of employment. The minimum and maximum wage payment period with the exception of casual employees should not be less than one week or more than a month, and where not expressly stipulated a month is the default wage period per section 75 of the Act payable before the third working day after the wage period. The wages are to be paid during working hours at the place of employment, or in any other way, such as through a bank account with the consent of the employee. Salaries should be made in legal tender, however, part payment in kind is not prohibited provided it is appropriate for the personal use and benefit of employee and his family, and the value attributable to such payment in kind is fair and reasonable. The payment in kind should not exceed forty per cent of the total amount paid out to the employee.
The minimum wage is set, adjusted and can even be abolished by the Minister on the advice of the Minimum Wages Advisory Board for specified trade categories. The stipulated categories include building, construction, hotel, catering, wholesale, watchmen, the domestic service sector, the agricultural sector etc. The current minimum wages set for these sectors are set out in the Subsidiary legislation in the Act.
Women on maternity leave are entitled to 25% of their salaries as stipulated by the Employment Act but the majority of the companies pay out at about 50% for the period.
Denmark
Trilateral negotiations (Danish: "trepartsforhandlinger") between employers', employees' & state organizations determine a collective remuneration agreement for most Danish privately employed blue-collar employees for a period of typically 3 or 4 years. Such an agreement is known as an "overenskomst" or just OK and covers an agreement between a specific employee union ("fagforening"/"fagforbund") and a specific employer organization ("arbejdsgiverforening"/"arbejdsgiverorganisation").
Political agreements made in 1997, known as "Ny Løn" (English: "new remuneration"), instigated a formal remuneration system that almost all employees in the Danish Government are employed under. An individual's remuneration consist of five components;
- grundløn (): base salary derived from education level & seniority
- kvalifikationsløn (): additional salary based on qualifications (additional formal or non-formal education, language or social skills etc.)
- funktionstillæg (functional supplement): additional salary paid for responsibilities of the specific role not covered by the above
- resultatillæg (achievement supplement): additional salary paid for specific predetermined achievements, typically used for long-term motivation of leadership
- engangstillæg (one-time supplement): additional salary paid to honor an outstanding effort, typically paid yearly
There is no minimum salary determined by law. A salary is often discussed or given as a gross monthly salary ("månedlig bruttoløn") which is pre-tax but including any pension benefits required by collective agreements ("overenskomst") to be deposited by the employer. This typically amounts to 8-12% of the monthly net salary ("månedlig nettoløn"), of which the employee is also obligated to deposit a part, typically another 4-6%.
European Union
According to European law, the movement of capital, services and (human) resources is unlimited between member states. Salary determination, such as minimum wage, is still the prerogative of each member state. Other social benefits, associated with salaries are also determined on member-state level.
India
In India, salaries are generally paid on the last working day of the month (Government, Public sector departments, Multi-national organisations as well as majority of other private sector companies). According to the Payment of Wages Act, if a company has less than 1,000 Employees, salary is paid by the 7th of every month. If a company has more than 1,000 Employees, salary is paid by the 10th of every month.
Minimum wages in India are governed by the Minimum Wages Act, 1948. Employees in India are notified of their salary being increased through a hard copy letter given to them.
Italy
In Italy, the Constitution guarantees a minimum wage, as stated in Article 36, Paragraph 1
:"Workers have the right to a remuneration commensurate to the quantity and quality of their work and in any case such as to ensure them and their families a free and dignified existence."
This constitutional guarantee is implemented not through a specific legislation, but rather through collective bargaining which sets minimum wage standards in a sector by sector basis. Collective bargaining is protected by trade unions, which have constitutional rights such as legal personality.
The Constitution also guarantees equal pay for women, as stated in Article 37, Paragraph 1
Japan
In Japan, owners would notify employees of salary increases through "jirei". The concept still exists and has been replaced with an electronic form, or E-mail in larger companies.
The position and world of "salarymen" is open to only one third of Japanese men. From school age these young potentials are groomed and pre-selected to one day join a company as a "salaryman". The selection process is rigorous and thereafter the process initiation speaks of total dedication to the company.
Poland
Article 65 section 4 of Polish Constitution states that "the minimum amount of salary for work or the method of determining this amount will be specified by separate act". In consequence, Polish Parliament (Sejm) has enacted an Act of 10 October 2002 on the minimum salary for work, which determines the rules and the procedure of establishing minimum salary for each year. The amount of the minimum salary (for employment contracts) and the amount of minimum hourly rate (for service contacts) is announced by the Council of Ministers by September 15 each year in the Official Journal of the Republic of Poland "Monitor Polski". As a result, full-time employees cannot be offered monthly salary lower than the statutory minimum, part-time employees are also covered by the statutory minimum calculated proportionally.
South Africa
Minimum wages are used widely in developing countries to protect vulnerable workers, reduce wage inequality, and lift the working poor out of poverty. The political popularity of minimum wages stems in part from the fact that the policy offers a means for redistributing income without having to increase government spending or establish formal transfer mechanisms. The challenge to policymakers is to find that wage level that is considered fair given workers' needs and the cost of living, but does not harm employment or a country's global competitiveness.
South African median employee earning is R2800 a month (USD ) and the average earning is around R8500. These figures are found in SA statistics. Indeed, they reflect the huge gap in the South African society with a large proportion of the population under poverty line that does not have the same opportunities for employment.
Median monthly earnings of white (R9500) and Indian/Asian (R6000) population were substantially higher
than the median monthly earnings of their coloured (R2652) and black African (R2167) counterparts. Black
Africans earned 22,% of what the white population earned; 36,1% of what Indians/Asians earned; and
81,7% of what the coloured population earned. In the bottom 5%, black Africans earned R500 or less per month while the white population earned R2 000 or less, while in the top 5% they earned R12 567 or more compared to the white population who earned R34000 or more per month.
Spain
In Spain, salaries are generally paid on a monthly basis, with many employees also receiving two additional extra payments in July and December, making fourteen installments per year. The Statutory Minimum Wage (Salario Mínimo Interprofesional, SMI) is revised annually by the government. For 2024, the SMI was set at €1,134 per month across 14 payments, equivalent to €15,876 annually.
Collective bargaining agreements (convenios colectivos) cover a large share of the workforce and strongly influence pay scales by sector and region. According to the Instituto Nacional de Estadística (INE), the average gross annual salary in 2022 was €25,353, with notable regional and sectoral differences.
The distinction between gross pay and net salary (sueldo neto) is significant, as taxes and social security contributions vary by income level and region. Spanish media often highlight this gap, with reports noting that employees frequently rely on a net salary calculator to estimate their actual take-home pay.
The Netherlands
In the Netherlands the salary which occurs most frequently is referred to as Jan Modaal. The term "modaal" is derived from the statistical term Modus. If the government's macro economic policy negatively affects this "Modaal" income or salary-group often the policy is adjusted in order to protect this group of income earners. The Dutch word "soldij" can be directly linked to the word "soldaat" or soldier, which finds its origin in the word for the gold coin solidus, with which soldiers were paid during the Roman Empire.
The Netherlands is in the top 5 of the highest salary-paying countries in the EU. The focus has been on the salary levels and accompanying bonuses whereas secondary benefits, though present, has been downplayed yet that is changing. The Netherlands claims a 36th position when it comes to secondary benefits when compared to other countries in Europe.
The minimum wage is determined through collective labor negotiations (CAOs). The minimum wage is age dependent; the legal minimum wage for a 16-year-old is lower than, for instance, a 23-year-old (full minimum wage). Adjustments to the minimum wage are made twice a year; on January 1 and on July 1. The minimum wage for a 21-year-old on January 1, 2013, is 1,065.30 Euro netto per month and on July 1, 2013, this minimum wage is 1,071.40 Euro netto per month.
For a 23 year old on 1 January 2014 is 1485,60 Euro gross salary / month plus 8% holiday subsidy so 1604,45 Euro gross salary / month
United States
In the United States, the distinction between periodic salaries (which are normally paid regardless of hours worked) and hourly wages (meeting a minimum wage test and providing for overtime) was first codified by the Fair Labor Standards Act of 1938. At that time, five categories were identified as being "exempt" from minimum wage and overtime protections, and therefore salariable. In 1991, some computer workers were added as a sixth category but effective August 23, 2004 the categories were revised and reduced back down to five (executive, administrative, professional, computer, and outside sales employees).
In June 2015 the Department of Labor proposed raising "the salary threshold from $455 a week (the equivalent of $23,660 a year) to about $970 a week ($50,440 a year) in 2016" On May 18, 2016, the Final rule updating the overtime regulations was announced. Effective December 1, 2016 it says: