Salary

A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. From the point of a view of running a business, salary can also be viewed as the cost of acquiring human resources for running operations, and is then termed personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.

Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. Salary is commonly paid in stages at fixed intervals, for example, monthly payments of one-twelfth of the annual salary.

Salary is determined by market pay rates for people doing similar work in similar industries in the same region. Salary is also determined by the pay rates and salary ranges established by an individual employer. Salary is also affected by the number of people available to perform the specific job in the employer's employment locale.

History

First paid salary

While there is no first pay stub for the first work-for-pay exchange, the first salaried work would have required a human society advanced enough to have a barter system to allow work to be exchanged for goods or other work. More significantly, it presupposes the existence of organized employers—perhaps a government or a religious body—that would facilitate work-for-hire exchanges on a regular enough basis to constitute salaried work. From this, most infer that the first salary would have been paid in a village or city during the Neolithic Revolution, sometime between 10,000 BCE and 6000 BCE.

A cuneiform inscribed clay tablet dated about BC 3100 provides a record of the daily beer rations for workers in Mesopotamia. The beer is represented by an upright jar with a pointed base. The symbol for rations is a human head eating from a bowl. Round and semicircular impressions represent the measurements.

By the time of the Hebrew Book of Ezra (550 to 450 BCE), salt from a person was synonymous with drawing sustenance, taking pay, or being in that person's service. At that time, salt production was strictly controlled by the monarchy or ruling elite. Depending on the translation of Ezra 4:14, the servants of King Artaxerxes I of Persia explain their loyalty variously as "because we are salted with the salt of the palace" or "because we have maintenance from the king" or "because we are responsible to the king".

Salarium

Similarly, the Roman word salarium linked employment, salt, and soldiers, but the exact link is not very clear. The latest common theory is that the word soldier itself comes from the Latin sal dare (to give salt), but previous theories were on the same ground. Alternatively, the Roman historian Pliny the Elder stated as an aside in his Natural History's discussion of sea water, that "[I]n Rome. . .the soldier's pay was originally salt and the word salary derives from it...". Others note that soldier more likely derives from the gold solidus, with which soldiers were known to have been paid, and maintain instead that the salarium was either an allowance for the purchase of salt or the price of having soldiers conquer salt supplies and guard the Salt Roads (Via Salaria) that led to Rome.

Roman empire and medieval and pre-industrial Europe

Regardless of the exact connection, the salarium paid to Roman soldiers has defined a form of work-for-hire ever since in the Western world, and gave rise to such expressions as "being worth one's salt".

Within the Roman Empire or (later) medieval and pre-industrial Europe and its mercantile colonies, salaried employment appears to have been relatively rare and mostly limited to servants and higher status roles, especially in government service. Such roles were largely remunerated by the provision of lodging, food, and livery clothes (i.e., "food, clothing, and shelter" in modern idiom), but cash was also paid. Many courtiers, such as valets de chambre, in late medieval courts were paid annual amounts, sometimes supplemented by large if unpredictable extra payments. At the other end of the social scale, those in many forms of employment either received no pay, as with slavery (although many slaves were paid some money at least), serfdom, and indentured servitude, or received only a fraction of what was produced, as with sharecropping. Other common alternative models of work included self- or co-operative employment, as with masters in artisan guilds, who often had salaried assistants, or corporate work and ownership, as with medieval universities and monasteries.

Commercial Revolution

Even many of the jobs initially created by the Commercial Revolution in the years from 1520 to 1650 and later during Industrialisation in the 18th and 19th centuries would not have been salaried, but, to the extent they were paid as employees, probably paid an hourly or daily wage or paid per unit produced (also called piece work).

Share in earnings

In corporations of this time, such as the several East India Companies, many managers would have been remunerated as owner-shareholders. Such a remuneration scheme is still common today in accounting, investment, and law firm partnerships where the leading professionals are equity partners, and do not technically receive a salary, but rather make a periodic "draw" against their share of annual earnings.

Second Industrial Revolution

From 1870 to 1930, the Second Industrial Revolution gave rise to the modern business corporation powered by railroads, electricity and the telegraph and telephone. This era saw the widespread emergence of a class of salaried executives and administrators who served the new, large-scale enterprises being created.

New managerial jobs lent themselves to salaried employment, in part because the effort and output of "office work" were hard to measure hourly or piecewise, and in part because they did not necessarily draw remuneration from share ownership.

As Japan rapidly industrialized in the 20th century, the idea of office work was novel enough that a new Japanese word (salaryman) was coined to describe those who performed it, as well as referencing their remuneration.

20th century

In the 20th century, the rise of the service economy made salaried employment even more common in developed countries, where the relative share of industrial production jobs declined, and the share of executive, administrative, computer, marketing, and creative jobs—all of which tended to be salaried—increased.

Salary and other forms of payment today

Today, the concept of a salary continues to evolve as part of a system of the total compensation that employers offer to employees. Salary (also now known as fixed pay) is coming to be seen as part of a "total rewards" system which includes bonuses, incentive pay, and commissions), benefits and perquisites (or perks), and various other tools which help employers link rewards to an employee's measured performance.

Compensation has evolved considerably. Consider the change from the days of and before the industrial evolution, when a job was held for a lifetime, to the the fact that, from 1978 to 2008, individuals who aged from 18 to 44, held an average number of 11 jobs. Compensation has evolved gradually moving away from fixed short-term immediate compensation towards fixed + variable outcomes-based compensation. An increase in knowledge-based work has also lead to pursuit of partner (as opposed to employee) like engagement.

By country

Botswana

In Botswana, salaries are almost entirely paid on a monthly basis with pay dates falling on different dates of the second half of the month. Pay day usually ranges from the 15th of the month to the last day. The date of disbursement of the salary is usually determined by the company and in some cases in conjunction with the recognized Workers Union. The Botswana Employment Act Cap 47:01 Chapter VII regulates the aspect of protection of wages in the contracts of employment. The minimum and maximum wage payment period with the exception of casual employees should not be less than one week or more than a month, and where not expressly stipulated a month is the default wage period as per section 75 of the Act payable before the third working day after the wage period. The wages are to be paid during working hours at the place of employment, or in any other way like through a bank account with the consent of the employee. Salaries should be made in legal tender however part payment in kind is not prohibited provided its appropriate for the personal use and benefit of employee and his family, and the value attributable to such payment in kind is fair and reasonable. The payment in kind should not exceed forty per cent of the total amount paid out to the employee.

The minimum wage is set, adjusted and can even be abolished by the Minister on the advise of the Minimum Wages Advisory Board for specified trade categories. The stipulated categories include building, construction, hotel, catering, wholesale, watchmen, the domestic service sector, the agricultural sector etc. The current minimum wages set for these sectors are set out in the Subsidiary legislation in the Act.

Women on maternity leave are entitled to 25% of their salaries as stipulated by the Employment Act but the majority of the companies pay out at about 50% for the period.

Zimbabwe

Zimbabwe operates on a two tier system being wages and salaries. Wages are managed by the various industry councils called NEC. National Employment Council. Each sector has its own NEC i.e. agriculture, communications, mining, catering, educational institutions etc. On the council there are representatives from the unions and the employers. The public sector is under the Public Service Commission and wages and salaries are negotiated there.

Wages are negotiated annually or biannually for the minimum wages and basic working conditions and remunerations. If there is a stalemate it goes for arbitration with the Ministry of labour. The ruling will become binding on all companies in that industry. Industries often then use their associations to negotiate and air their views. For example the mining industry nominates an employee within the chamber of mines to attend all meetings and subcommittee with industry players is a forum for discussions.

Salaries are negotiated by the respective employees. However, NEC obviously affects the relativity and almost acts as a barometer for salaried staff. Salaries and wages in Zimbabwe are normally paid monthly. Most companies pay around the 20th does allow various statutory payments and processing for the month end. Government employees are also staggered to ease the cash flow though teachers are paid around mid-month being 16th. Agricultural workers are normally paid on the very last day of the month as they are contract employees. Zimbabwe is a highly banked society with most salaries being banked. All government employees are paid through the bank. Since "dollarization" (movement from the Zimbabwean dollar to USD) we have been moving towards a more informal sector and these are paid in ‘brown envelopes’.

PAYE(Pay As You Earn) is a significant contributor to tax being 45%. Given the high unemployment rate the tax is quite heavy. This of course captures those that pay and keep records properly. The average salary is probably $250. This is skewed downwards by the large number of government employees whose average salary is around there. At the top end salaries are quite competitive and this is to be able to attract the right skills though the cost of living is high so it balances this out. A Zimbabwe top earner spends a lot more money on necessities than say a South African top earner. This is more evident when a comparison with USA or England is done. The need to have a generator, borehole or buy water or take care of the extended family since there is no welfare given the government’s financial position. Flashback: In the hyperinflation days salaries was the cheapest factor of production given that it was paid so irregularly though it went to twice monthly. As workers could not withdraw their money remuneration was often in the following forms • Fuel coupons most popular and individuals were paid in liters of fuel • The product that the company is selling i.e. Sugar for the sugar producers, pork/meat for the abattoirs, potatoes for farmers, drinks for beverage manufacturers • Foreign currency payment was illegal and one had to seek special dispensation or had to show that their revenue/ funding was received in foreign currency like NGOs, or exporters • Prices were price controlled and by remunerating in the product it basically allowed the employees to side sell for real value. • Shares for the listed companies on the stock market (not in the traditional option scheme but just getting shares) Zimbabwe traditionally had a competitive advantage in its cost of labor. But with "dollarization" and higher cost of living this is slowly being in eroded. For example your average farm employee probably earned the equivalent of $20 but they could buy a basket of goods currently worth $500. Now you average farm work earns $80 and that basket of goods is as mentioned $500. The basket being soap, "mealie" meal, school fees, a bit of protein, etc.

India

In India, salaries are generally paid on the last working day of the month (Government, Public sector departments, Multinational organizations as well as majority of other private sector companies). According to the Payment of Wages Act, if a company has less than 1000 Employees, salary is paid by the 7th of every month.If a company has more than 1000 Employees, salary is paid by the 10th of every month.

The minimum wages in India are governed by the Minimum Wages Act, 1948. Employees in India are notified of their salary being increased through a hard copy letter given to them.

The Netherlands

In the Netherlands the salary which occurs most frequently is referred to as Jan Modaal. The term "modaal" is derived from the statistical term Modus. If the governments' macro economic policy negatively affects this "Modaal" income or salary-group often the policy is adjusted in order to protect this group of income earners. The Dutch word "soldij" can be directly linked to the word "soldaat" or soldier, which finds it's origin in the word for the gold coin solidium, with which soldiers were paid during the Roman Empire.

The Netherlands is in the top 5 of the highest salary paying countries in the EU. The focus has been on the salary levels and accompanying bonuses whereas secondary benefits, though present, has been downplayed yet that is changing. The Netherlands claims a 36th position when it comes to secondary benefits when compared to other countries in Europe.

The minimum wage is determined through CAO's which stands for collective labor negotiations. The minimum wage is age dependent; the legal minimum wage for a 16year old is lower than for instance for a 23 year old person. Adjustments to the minimum wage are made twice a year; on January 1 and on July 1. The minimum wage for a 21 year old on January 1, 2013 is 1,065.30 Euro per month and on July 1, 2013 this minimum wage is 1,071.40 Euro per month.

Japan

Further information: Salaryman

In Japan, owners would notify employees of salary increases through "jirei". The concept still exists and has been replaced with an electronic form, or email in larger companies. The position and world of "salarymen" is open to only one third of Japanese men. From schooling age these young potentials are groomed and pre-selected to one day join a company as a "salaryman". The selection process is rigorous and thereafter the process initiation speaks of total dedication to the company.

European Union

According to European law, the movement of capital, services and (human) resources is unlimited between member states. Salary determination, such as minimum wage, is still the prerogative of each member state. Other social benefits, associated with salaries are also determined on member-state level.

United States

Further information: Income in the United States

In the United States, the distinction between periodic salaries (which are normally paid regardless of hours worked) and hourly wages (meeting a minimum wage test and providing for overtime) was first codified by the Fair Labor Standards Act of 1938. At that time, five categories were identified as being "exempt" from minimum wage and overtime protections, and therefore salariable. In 1991, some computer workers were added as a sixth category but effective August 23, 2004 the categories were revised and reduced back down to five (executive, administrative, professional, computer, and outside sales employees). Salary is generally set on a yearly basis.

"The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the [Labor] Department's regulations."

Of these five categories only Computer Employees has an hourly wage-based exemption ($27.63 per hour) while Outside Sales Employee is the only main category not to have the minimum salary ($455 per week) test though some sub categories under Professional (like teachers and practitioners of law or medicine) also do not have the minimum salary test.

A general rule for comparing periodic salaries to hourly wages is based on a standard 40 hour work week with 50 weeks per year (minus two weeks for vacation). (Example: $40,000/year periodic salary divided by 50 weeks equals $800/week. Divide $800/week by 40 standard hours equals $20/hour).

South Africa

Minimum wages are used widely in developing countries to protect vulnerable workers, reduce wage inequality, and lift the working poor out of poverty. The political popularity of minimum wages stems in part from the fact that the policy offers a means for redistributing income without having to increase government spending or establish formal transfer mechanisms. The challenge to policymakers is to find that wage level that is considered fair given workers’ needs and the cost of living, but does not harm employment or a country’s global competitiveness.

South African median employee earning is R2800 a month (you can divide approximately by 10 to have the euro equivalent) and the average earning is around R8500. These figures are found in SA statistics. Indeed, they reflect the huge gap in the South African society with a large proportion of the population under poverty line that doesn’t have the same opportunities for employment.

Median monthly earnings of white (R9 500) and Indian/Asian (R6 000) population were substantially higher than the median monthly earnings of their coloured (R2 652) and black African (R2 167) counterparts. Black Africans earned 22,% of what the white population earned; 36,1% of what Indians/Asians earned; and 81,7% of what the coloured population earned. In the bottom 5%, black Africans earned R500 or less per month while the white population earned R2 000 or less, while in the top 5% they earned R12 567 or more compared to the white population who earned R34 000 or more per month.

Negotiation of salary

Prior to the acceptance of an employment offer, the prospective employee usually has the opportunity to negotiate the terms of the offer. This primarily focuses on salary, but extends to benefits, work arrangements, and other amenities as well. Negotiating salary can potentially lead the prospective employee to a higher salary. In fact, a 2009 study of employees indicated that those who negotiated salary saw an average increase of $4,913 from their original salary offer. In addition, the employer is able to feel more confident that they have hired an employee with strong interpersonal skills and the ability to deal with conflict. Negotiating salary will thus likely yield an overall positive outcome for both sides of the bargaining table.

Perhaps the most important aspect of salary negotiation is the level of preparation put in by the prospective employee. Background research on comparable salaries will help the prospective employee understand the appropriate range for that position. Assessment of alternative offers that the prospective employee has already received can help in the negotiation process. Research on the actual company itself will help identify where concessions can be made by the company and what may potentially be considered off-limits. These items, and more, can be organized in to a negotiations planning document that can be used in the evaluation of the offers received from the employer. Newer websites, like http://www.thesalarypeople.com , do help in preparing negotiation tactics here in the US as they enable a search by firm, not only job title and zip, allowing a very targeted salary negotiation.

Effects of perspective

The same 2009 study highlighted the personality differences and negotiation mind-sets that contributed to successful outcomes. Overall, individuals who are risk-averse (e.g., worried about appearing ungrateful for the job offer) tended to avoid salary negotiations or use very weak approaches to the negotiation process. On the contrary, those who were more risk-tolerant engaged in negotiations more frequently and demonstrated superior outcomes. Individuals who approached the negotiation as a distributive problem (i.e. viewing the a higher salary as a win for him/her and a loss to the employer) ended up with an increased salary, but lower rate of satisfaction upon completion. Those who approached the negotiation as an integrative problem (i.e. viewing the negotiation process an opportunity to expand the realm of possibilities and help both parties achieve a “win” outcome) were able to both secure an increased salary and an outcome they were truly satisfied with.

Gender differences

Salary disparities between men and women may partially be explained by differences in negotiation tactics used by men and women. Although men and women are equally likely to initiate in a salary negotiation with employers, men will achieve higher outcomes than women by about 2% of starting salary Studies have indicated that men tend to use active negotiation tactics of directly asking for a higher salary, while women tend to use more of an indirect approach by emphasizing self-promotion tactics (e.g. explaining the motivation to be a good employee). Other research indicates that early-childhood play patterns may influence the way men and women negotiate. Men and women tend to view salary differently in terms of relative importance. Overall level of confidence in a negotiation may also be a determinant of why men tend to achieve higher outcomes in salary negotiations. Finally, the awareness of this stereotype alone may directly cause women to achieve lower outcomes as one study indicates. Regardless of the cause, the outcome yields a disparity between men and women that contributes to the overall wage gap observed in many nations.

The Constitution of the Republic of South Africa 239 provides for the right to fair labour practices in terms of section 23. Section 9 of the Constitution makes provision for equality in the Bill of Rights, which an employee may raise in the event of an equal pay dispute. In terms of section 9(1) “everyone is equal before the law and has the right to equal protection and benefit of the law’” Furthermore, “the state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language, and birth.” South African employees who were in paid employment had median monthly earnings of R2 800. The median monthly earnings for men (R3 033) were higher than that for women (R2 340) - women in paid employment earned 77,1% of what men did.

Role of weight

Research done in 2011 showed that the “weight double standard” may be more complex that what past research has suggested. This is not only relevant to women, but also to men. The smallest income gap differences occur at thin weights (where men are penalized and women are rewarded) and the opposite happens at heavier weights, where the women is affected more negatively.

See also

• List of countries by monthly average wage
• List of countries in Europe by average wage
• Executive compensation
• List of countries by average wage
• List of single-digit salary earners
• List of largest sports contracts
• Salaryman (Japan)
• Peak earning years