Salary, Pay, and Income

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A good job should provide satisfaction, security, and a feeling of accomplishment. However, you don't work for free. Salary is an important component to our working lives, and optimizing salary negotiations and earning potential should always remain top-of-mind.

Salary is the agreed upon monetary pay and compensation received by an employee from an employer in exchange for labor. It is considered separate from wages paid hourly, or in some other discrete unit, because salaries are instead paid periodically; equally distributed over each period regardless of the arbitrary amount of time worked within each period. There are currently five categories of jobs exempt from minimum wage and overtime protections. The categories include: executive, administrative, professional, computer, and outside sales employees.

Salaries are typically calculated on an annual basis and dispersed in equal amounts at a consistent, periodic rate. Qualifications to become a salaried employee are set by the U.S. Department of Labor and require an employee to make at least $455 per week among other job duty requirements. One exception to this rule is Outside Sales Employees who are exempt from the minimum salary requirement. Other service oriented positions that include tips as part of pay are also treated differently by Federal wage law.

The amount of salaried income is not based in the amount of time worked but on the level of job performance. As such, a salaried employee will have a minimum work hour requirement, but may also be required to work additional time, to meet specified performance levels, without an increase in pay. Additional perks may also be included to enhance the value of a salaried position such as quicker accumulation of vacation days and periodic bonuses.

It is sometimes useful to reduce a salary to its hourly income equivalent. To compare a salaried rate to an hourly rate, simply divide the annual salary by 50 weeks (including two vacation weeks), then divide the result by 40 hours (a standard full-time work week). The conversion can be utilized when comparing potential income between an hourly and salaried job or to more easily budget a salaried income.
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