Wages

What Do Wages Mean?

Wages are one type of financial compensation provided by employers to their employees in accordance with the hours every employee has worked.

How to Calculate an Employee’s Wage

Generally, workers are paid wages at a rate per hour. So if you are an employer, simply multiply each employee's rate by the number of hours they worked to determine their wage. And if any wage worker has put in overtime hours, the employer is then required to calculate their overtime pay by multiplying 1.5 times the hourly rate by the number of hours worked in overtime. 

For example, an employee of your company works for $25 an hour, and you pay wages on a weekly basis. The employee has worked a total of 40 hours throughout a seven-day pay period. So, his weekly wage is $25 × 40, which is $1000.

However, if this employee worked 6 overtime hours during that week, then multiply 1.5 by ($25 × 6), and you will get the amount of overtime payment, which will be $225. So, the employee's total wage for that week will be ($1000 + $225), which is $1225.

While calculating wages, employers must also calculate taxes and other payroll deductions for employees.  

Frequency of Paying Wages

The most typical payment frequency is bi-weekly. Usually paid one week after the work was completed, these wages are frequently paid in arrears. This gives the employer enough time to determine and prepare the owed wages.

Although there are several frequency options for paying wages, the following are the most typical:

• Weekly (52 payments a year)
• Bi-weekly (26 payouts a year)
• Semi-monthly (24 payments a year)
• Monthly (12 paychecks a year)

Key Differences Between Wages and Salaries

Although both wages and salaries are typical monetary compensation paid to employees in exchange for their work, the key distinctions between a salary and a wage are how their pay is determined and disbursed, as well as how overtime is determined.