Wages and Salary Differences – You are probably already familiar with wages and salary. The two terms refer to the notion that every worker who has completed their tasks in a job position will get a reward within a certain period.
Often, people think that the two terms have the same meaning. However, the two terms are different. Most companies do use the term salary to reward their employees. So, what about wages? And what are the differences between wages and salary? Check out the six essential points of the difference between wages and salary below!
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Understanding Wages and Salaries
1. Definition of Salary
Salary in According to The Big Indonesian Dictionary is defined as a fixed, regular payment; remuneration received by workers in the form of money based on a specific period. The term salary itself is not contained in the laws and regulations of the Republic of Indonesia.
However, as previously explained, most companies use the term salary to pay their employees for their work. Usually, the company will provide compensation in the form of salaries to employees every month that the company has determined. For example, an employee will get a salary according to the time and nominal amount that has been agreed upon in the initial contract between the employee and the company.
2. Definition of Wages
Meanwhile, the meaning of wages itself has been stated in the legislation. Wages inIndonesian Labor Law No. 13 of 2003 concerning Manpower, namely the right in the form of money as compensation from the entrepreneur or employer to workers/laborer which amount is determined and paid according to a work agreement, a deal, or laws and regulations including allowances for the worker/laborer and their family for a job and/or service already or to be executed/rendered.
Meanwhile, according to According to The Big Indonesian Dictionarywages are money and other things paid as compensation that has been expended as payment for services/labor, wages, and reward.
In simple terms, wages are not always tied to money or fixed time like salary. Wages can be in the form of goods, food, precious metals, etc. The pay period salary is also flexible within one month. After the work is completed within two weeks, wages are immediately given to the worker.
Wages and Salary Differences
There are six factors of difference between wages and salary. What are they? Here is the explanation.
1. Job Position Level
The first difference between wages and salary is in the employee's level of job position. A company has an organizational hierarchy that distinguishes each class of employees. The group is divided into upper and lower groups, where each level has different rights and responsibilities.
Generally, top-level workers such as managers and permanent employees will be given salaries. Meanwhile, wages will be given to lower-level workers, for example, a janitor who cleans the office twice a week.
2. Employment Status
As previously explained, salaries will be given to permanent or contract employees within a specific time according to the work agreement. Meanwhile, it differs from the wages given to day laborers, freelancers, or seasonal workers.
3. Compounding Components
In salary, a number of components make up the salary received by employees, namely allowances in accordance with statutory regulations. The benefits include health benefits, transportation, family, and other benefits.
Unlike salaries, wages do not have several constituent components. Wage refers to a single component, where the nominal wages also vary according to the system for calculating working hours, the number of absences, to the amount of work that has been done.
4. Pay Period
Generally, employees who work in a company will be given a salary according to a specific date and a nominal amount by the work agreement. For example, employees will be given a monthly salary at the beginning or end of the month. Some companies pay salaries in longer terms, such as quarterly (3 months), per semester (6 months), and yearly.
Meanwhile, employees or workers who are not tied to the company will be given a salary when they have completed their work. Usually daily, weekly, or monthly, according to the agreement between service users and workers.
5. Nominal Amount
As previously explained, salaries tend to have a consistent and fixed amount in each pay period (per month). However, this is different for wages.
The wages that will be given will be determined from how much work is completed or even measured by how difficult a job is.
6. Basis for Determining Compensation
The difference between wages and salary is also found in the determination of compensation, where salary will be determined according to the level of education, position, a field of work, experience, and so on. This has been regulated by applicable government regulations, which are the Laws, Government Regulations, Ministerial Decrees/Regulations, and others.
Meanwhile, the determination of wages is only measured by the level of difficulty of the work, the number of jobs, the skills needed, and so on.
How to Manage Your Finances
After understanding the meaning and essential factors of differences between wages and salary, here are ways to manage your finances efficiently.
1. Live a Minimalist Life
You can start living as minimally as possible by reducing expenses that are not too important. But this does not mean you are afraid or too stingy to spend money. You can start living a minimalist life by bringing supplies from home, using public transportation or a private vehicle that saves money on fuel, and reducing the wants that are not a priority.
2. Create a 40/30/20/10 Budget Rule
Create a 40/30/20/10 budget rule to manage your wages and salary well. The explanation of the 40/30/20/10 budget rule is as follows.
- 40 percent of your salary will be allocated for daily needs, such as monthly shopping, electricity, water, etc.
- 30 percent of your salary will be allocated to pay installments, for example, house installments, car or other vehicle payments, or other installments.
- 20 percent of your salary will be allocated for savings. Of course, you must keep your salary for future savings to be ready to meet emergency needs such as hospital fees, tuition fees, accidents, and others.
- 10 percent of your salary will be allocated for entertainment, such as hanging out with family or friends, online shopping, or eating out at restaurants.
3. Use Money Management Apps
Sometimes we need to be more active in recording all income and expenses. Keeping track of all your income and costs will make it easier for you to manage your finances better. To make this easier, you can use money management apps to help you manage your finances, record all income and expenses, plan finances, and save. One of the trusted money management apps that you can use is Whiz!
Also Read: How to Save 50 Millions in a Year
There is a thorough explanation of the meaning, differences, and how to manage your wages and salary. If previously you still thought that the two terms were the same, of course, now you can tell the difference. May it come in handy in your daily life!
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