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Salary is payment that is determined by workers’ input. In contrast to performance pay (or piece rates), in which compensation is determined by output, salary is usually independent of output. Hence, the commonly used expression “fixed salary” suggests a form of base pay in which workers are guaranteed a fixed payment for a particular period regardless of their performance. Input is some measure of effort, and is generally time-based, as in hours or days worked. Becoming salaried requires a minimum level of effort that is stipulated in advance—for example, 8 hours a day or 20 days per month.

Most compensation schemes involving a salary offer a combination of fixed salary plus performance pay, rather than consisting entirely of one kind but not the other. Compensation that ...

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