Salaries and Wages

Wages and salaries are the main forms of payments made to an employee for her/his work or services performed. Salary is a fixed periodical payment paid to an employee for regular labor or services, generally into a bank account, while wages are habitually paid by the day or week for casual work or services that are of a more irregular nature, and are generally paid in cash. However, the terms wage and salary are generally used interchangeably.

Robert Torrens defines wages as “the articles of wealth which the labourer received in exchange for his labour.” Torrens adds that “when the quantity of necessaries and comforts which the labourer receives is large, wages are said to be high; when it is small, they are said to be low.”

Pay structures have changed considerably in recent years, with moves away from basic rates to more incentives payments, such as bonuses and fringe benefits such as pension and health contributions. In addition to the basic rate, employees often receive other payments—the most common examples are overtime pay, shift pay, merit, seniority, cost of living allowance, performance-related (such as bonuses), and special additions that are paid to workers during abnormal working circumstances (such as danger).

Minimum Wages

The minimum wage is a statutory and generally legally enforced minimum below which wages are illegal. It was established for the first time in Australia and New Zealand. Minimum wages vary country to country, and also may be restricted to certain industries or limited to workers above a particular age. Most countries have some sort of national minimum wage and it is upgraded periodically.

France introduced the statutory minimum wage with the salaire minimun interprofessionel garanti (SMIG) in 1950, and it was designed based on a special survey that identified an hourly rate to cover the basic needs of individual unskilled workers. The SMIG was replaced by the salaire minimun interprofessionel de croissance (SMIC), including provisions against inflation, adjustment to the national economic growth, and a national commission composed of equal proportion of government ministers, confederation of employers, and trade union representatives to revise the SMIC annually.

The United States has had a federal minimum wage since the Fair Labor Standards Act (FLSA) in 1938. The FLSA is enforced by the Wage and Hour Division of the U.S. Department of Labor. It establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting workers in the private sector and in federal, state, and local governments. According to the latest FLSA signed on May 25, 2007, covered workers are entitled to a minimum wage of not less than $6.55 per hour effective July 24, 2008, and $7.25 per hour effective July 24, 2009, to be paid in cash or equivalent. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek. In the case of the United States, there are two types of coverage:

• Enterprise coverage, in which if a company of more than two employees and a turnover of more than US$500,000 is covered by the FLSA, then all its employees are entitled to FLSA protections
• Individual coverage, in which even if a company is not covered by the FLSA, individual workers may be entitled to the FLSA

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