The Difference Between a Wage and a Salary (and Why It Matters)

If you’re employed, you’re likely receiving one of two primary types of payment: a salary or an hourly wage. While the difference between the two is easy to understand on its face, it’s important to consider the pros and cons of being being a salaried versus a wage worker.

Whether you’re job seeking or looking to renegotiate your current position, here’s what to know about being salaried versus earning an hourly wage.

The differences between a wage and a salary

First, some basic definitions. A salary is a fixed amount of compensation for work over a set period of time, regardless of the number of hours worked. Wages, on the other hand, are compensation paid to an employee, usually at a set hourly rate and dependent on the number of hours spent working.

Here’s how those differences really impact you as an employee.

Fixed versus variable income

The most crucial difference between earning a salary and being paid an hourly wage is the security of a fixed income. If you have a salary of, say, $63,000, then you can depend on a bi-weekly paycheck of $2,423.08 (though that number will be closer to $2,000 after taxes.)

Hourly employees, however, do not get that same sense of security. If your employer cuts your hours one week, then you only earn as much as you get to work. On the other hand, wage earners are typically eligible for overtime pay.

Different expectations for work-life balance

Although salaried employees are guaranteed a fixed wage, a salary often comes with expectations that you’ll go “above and beyond” at your job. Depending on your field, this means you might find yourself grinding away well beyond the standard 40-hour work week.

With an hourly wage, workers may find it easier to keep their work and personal lives separate. But that freedom comes with a price in the form of fluctuating wages and a lack of benefits (more on that in the next section).

However you are paid, only you can determine if the amount of hours you actually work — and what that means for your personal life — is worth your salary.

Benefits (or lack thereof)

Finally, the most glaring difference between salaried workers and wage earners is the benefits they do (or do not) receive. Salaried employees are much more likely to be eligible for employer-sponsored benefits: Healthcare insurance, paid vacation and personal days, and retirement accounts with matching employer contributions. These benefits bring employees significant financial and overall lifestyle perks that sadly are not found with most wage-based jobs.

The bottom line

While working for an hourly wage can provide greater flexibility with your schedule and the potential for overtime pay, for the most part, a salaried position is a much better deal. Even if the hourly wage listed in a job posting looks to be on par with another job’s annual salary, the additional benefits and overall sense of stability that come with a salaried role make it most job seeker’s goal for a reason.