Understanding the Difference Between Wages and Salary: Can You Help Clarify?

Hi,

Please tell me what the difference is between wages and salary because our accounts department wants separate figures for salary and wages.

Thanks,
Vinod

Legally, there is hardly any difference between wages and salary. In fact, by whatever name called, any remuneration paid to an employee will be treated as 'salary' or 'wages'. However, separate treatment is needed in accounts to show the factory cost, cost of production, and the like. Therefore, remuneration paid to employees who are directly involved in production and whose services can be attributed directly to a cost center are taken as 'wages' or labor cost (in Cost Sheet). Remuneration paid to clerical staff, supervisors, managers, etc., whose duty is to supervise a team of employees, are taken as 'salary' (included in administrative overhead). In final accounts, wages will be shown as debited to Trading A/C, whereas salary will be debited to Profit & Loss A/C.

There can also be a presumption that amounts paid piece-rate or on a daily basis are treated as wages, and amounts paid on a monthly basis are treated as salary. Similarly, wages may be variable, depending upon the unit of production, and as such, it will be a direct/variable cost, whereas salary will be fixed and common for the entire units of production. Moreover, the above classification will have a bearing mainly in manufacturing units and not in the service industry.

Regards,

Madhu.T.K

Hi Vikas,

Wages, as defined in the Payment of Wages Act, refer to any remuneration capable of being expressed in terms of money. Salary is a more common term used for the wages paid to white-collar employees. You never hear of managers being paid wages or clerks being paid wages; wages are typically associated with workers or laborers performing manual work.

Sawant

Salary vs. Wages

1. White-collar people
2. No specific Act
3. Basically for monthly-rated people
4. No specific payment date
5. No mandatory register is required to maintain

1. Blue-collar people
2. Specified in the Minimum Wages Act
3. Basically for daily-rated people
4. To be paid within the 7th of the next month after the completion of the wage period
5. Few mandatory registers are required to maintain as per law for inspection

Thanks

Is the Minimum Wages Act applicable to those who receive a salary, or is it only for workers? I mean to say, as it is the Minimum "Wages" Act, is it related only to workers and not to supervisors? Can we pay supervisors less than the minimum wages or not?

Regards,
Dinesh Kumar

Factory workers receive wages, which are direct expenses and are reflected in the Trading Account.

Office workers receive a salary, which is considered an indirect expense and is reflected in the Profit and Loss Account.

Regards