Salary
Encyclopedia
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 wage
s, where each job, hour or other unit is paid separately, rather than on a periodic basis.
From the point of 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.
or city
during the Neolithic Revolution
, sometime between 10,000 BC and 6000 BC.
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 BC), 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 monarch
y 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."
itself comes from the Latin sal dare (to give salt). 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. . ." Plinius Naturalis Historia XXXI. 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 Salarium) that led to Rome.
, and gave rise to such expressions as "being worth one's salt."
Yet 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 and food, and livery
clothes, 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
(though 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
guild
s, who often had salaried assistants, or corporate work and ownership, as with medieval universities and monasteries
.
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
).
s of this time, such as the several East India Companies, many managers would have been remunerated as owner-shareholder
s. Such a remuneration
scheme is still common today in accounting, investment, and law firm
partnership
s where the leading profession
als are equity
partners, and do not technically receive a salary, but rather make a periodic "draw" against their share of annual earnings.
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, and their remuneration.
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.
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 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). Real median household income in the United States climbed 1.3 percent between 2006 and 2007, reaching $50,233 according to a report released by the U.S. Census Bureau. This is the third annual increase in real median household income.
Group', salary is paid on 9th of month for the preceding month. In case 9th is a holiday, it is paid on 10th, and in case both 9th and 10th are holiday, it is paid on 8th.
The minimum wages in India are governed by the Minimum Wages Act, 1948. Details regarding the same can be seen at http://labourbureau.nic.in/wagetab.htm Employees in India are notified regarding their salary increase through a hard copy letters given to them.
Employment contract
A contract of employment is a category of contract used in labour law to attribute right and responsibilities between parties to a bargain.On the one end stands an "employee" who is "employed" by an "employer". It has arisen out of the old master-servant law, used before the 20th century...
. It is contrasted with piece wage
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
s, where each job, hour or other unit is paid separately, rather than on a periodic basis.
From the point of a business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
, salary can also be viewed as the cost of acquiring human resources
Human resources
Human resources is a term used to describe the individuals who make up the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations...
for running operations
Business operations
Business operations are those ongoing recurring activities involved in the running of a business for the purpose of producing value for the stakeholders...
, and is then termed personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.
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 villageVillage
A village is a clustered human settlement or community, larger than a hamlet with the population ranging from a few hundred to a few thousand , Though often located in rural areas, the term urban village is also applied to certain urban neighbourhoods, such as the West Village in Manhattan, New...
or city
Urban revolution
In anthropology and archaeology, the Urban Revolution is the process by which small, kin-based, nonliterate agricultural villages were transformed into large, socially complex, urban societies....
during the Neolithic Revolution
Neolithic Revolution
The Neolithic Revolution was the first agricultural revolution. It was the transition from hunting and gathering to agriculture and settlement. Archaeological data indicates that various forms of plants and animal domestication evolved independently in 6 separate locations worldwide circa...
, sometime between 10,000 BC and 6000 BC.
A cuneiform
Cuneiform
Cuneiform can refer to:*Cuneiform script, an ancient writing system originating in Mesopotamia in the 4th millennium BC*Cuneiform , three bones in the human foot*Cuneiform Records, a music record label...
inscribed clay tablet dated about BC
Anno Domini
and Before Christ are designations used to label or number years used with the Julian and Gregorian calendars....
3100 provides a record of the daily beer
Beer
Beer is the world's most widely consumed andprobably oldest alcoholic beverage; it is the third most popular drink overall, after water and tea. It is produced by the brewing and fermentation of sugars, mainly derived from malted cereal grains, most commonly malted barley and malted wheat...
rations for workers in Mesopotamia
Mesopotamia
Mesopotamia is a toponym for the area of the Tigris–Euphrates river system, largely corresponding to modern-day Iraq, northeastern Syria, southeastern Turkey and southwestern Iran.Widely considered to be the cradle of civilization, Bronze Age Mesopotamia included Sumer and the...
. 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
Book of Ezra
The Book of Ezra is a book of the Hebrew Bible. Originally combined with the Book of Nehemiah in a single book of Ezra-Nehemiah, the two became separated in the early centuries of the Christian era...
(550 to 450 BC), salt
Salt
In chemistry, salts are ionic compounds that result from the neutralization reaction of an acid and a base. They are composed of cations and anions so that the product is electrically neutral...
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 monarch
Monarch
A monarch is the person who heads a monarchy. This is a form of government in which a state or polity is ruled or controlled by an individual who typically inherits the throne by birth and occasionally rules for life or until abdication...
y 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."
The Roman word salarium
Similarly, the Roman word salarium linked employment, salt and soldiers, but the exact link is unclear. The least common theory is that the word soldierSoldier
A soldier is a member of the land component of national armed forces; whereas a soldier hired for service in a foreign army would be termed a mercenary...
itself comes from the Latin sal dare (to give salt). Alternatively, the Roman historian Pliny the Elder
Pliny the Elder
Gaius Plinius Secundus , better known as Pliny the Elder, was a Roman author, naturalist, and natural philosopher, as well as naval and army commander of the early Roman Empire, and personal friend of the emperor Vespasian...
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. . ." Plinius Naturalis Historia XXXI. Others note that soldier more likely derives from the
gold solidus
Solidus (coin)
The solidus was originally a gold coin issued by the Romans, and a weight measure for gold more generally, corresponding to 4.5 grams.-Roman and Byzantine coinage:...
, 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 Salarium) that led to Rome.
Payment in the 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 worldWestern world
The Western world, also known as the West and the Occident , is a term referring to the countries of Western Europe , the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand...
, and gave rise to such expressions as "being worth one's salt."
Yet within the Roman Empire
Roman Empire
The Roman Empire was the post-Republican period of the ancient Roman civilization, characterised by an autocratic form of government and large territorial holdings in Europe and around the Mediterranean....
or (later) medieval and pre-industrial Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
and its mercantile
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
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 and food, and livery
Livery
A livery is a uniform, insignia or symbol adorning, in a non-military context, a person, an object or a vehicle that denotes a relationship between the wearer of the livery and an individual or corporate body. Often, elements of the heraldry relating to the individual or corporate body feature in...
clothes, but cash was also paid. Many courtiers, such as valets de chambre
Valet de chambre
Valet de chambre , or varlet de chambre, was a court appointment introduced in the late Middle Ages, common from the 14th century onwards. Royal Households had many persons appointed at any time...
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
Slavery
Slavery is a system under which people are treated as property to be bought and sold, and are forced to work. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand compensation...
(though many slaves were paid some money at least), serfdom
Serfdom
Serfdom is the status of peasants under feudalism, specifically relating to Manorialism. It was a condition of bondage or modified slavery which developed primarily during the High Middle Ages in Europe and lasted to the mid-19th century...
, and indentured servitude, or received only a fraction of what was produced, as with sharecropping
Sharecropping
Sharecropping is a system of agriculture in which a landowner allows a tenant to use the land in return for a share of the crop produced on the land . This should not be confused with a crop fixed rent contract, in which a landowner allows a tenant to use the land in return for a fixed amount of...
. Other common alternative models of work included self- or co-operative employment, as with masters in artisan
Artisan
An artisan is a skilled manual worker who makes items that may be functional or strictly decorative, including furniture, clothing, jewellery, household items, and tools...
guild
Guild
A guild is an association of craftsmen in a particular trade. The earliest types of guild were formed as confraternities of workers. They were organized in a manner something between a trade union, a cartel, and a secret society...
s, who often had salaried assistants, or corporate work and ownership, as with medieval universities and monasteries
Monastery
Monastery denotes the building, or complex of buildings, that houses a room reserved for prayer as well as the domestic quarters and workplace of monastics, whether monks or nuns, and whether living in community or alone .Monasteries may vary greatly in size – a small dwelling accommodating only...
.
Payment during the Commercial Revolution
Even many of the jobs initially created by the Commercial RevolutionCommercial Revolution
The Commercial Revolution was a period of European economic expansion, colonialism, and mercantilism which lasted from approximately the 16th century until the early 18th century. It was succeeded in the mid-18th century by the Industrial Revolution. Beginning with the Crusades, Europeans...
in the years from 1520 to 1650 and later during Industrialisation
Industrialisation
Industrialization is the process of social and economic change that transforms a human group from an agrarian society into an industrial one...
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
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
or paid per unit produced (also called piece work
Piece work
Piece work is any type of employment in which a worker is paid a fixed "piece rate" for each unit produced or action performed regardless of time...
).
Share in earnings as payment
In corporationCorporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s of this time, such as the several East India Companies, many managers would have been remunerated as owner-shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s. Such a remuneration
Remuneration
Remuneration is the total compensation that an employee receives in exchange for the service they perform for their employer. Typically, this consists of monetary rewards, also referred to as wage or salary...
scheme is still common today in accounting, investment, and law firm
Law firm
A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other...
partnership
Partnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...
s where the leading profession
Profession
A profession is a vocation founded upon specialized educational training, the purpose of which is to supply disinterested counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain....
als are equity
Ownership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
partners, and do not technically receive a salary, but rather make a periodic "draw" against their share of annual earnings.
The Second Industrial Revolution and salaried payment
From 1870 to 1930, the Second Industrial RevolutionSecond Industrial Revolution
The Second Industrial Revolution, also known as the Technological Revolution, was a phase of the larger Industrial Revolution corresponding to the latter half of the 19th century until World War I...
gave rise to the modern business corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
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
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
enterprises being created.
New managerial
Managerial economics
Managerial economics as defined by Edwin Mansfield is "concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision." It is sometimes referred to as business economics and is a branch of economics that applies microeconomic...
jobs lent themselves to salaried employment, in part because the effort and output of "office
Office
An office is generally a room or other area in which people work, but may also denote a position within an organization with specific duties attached to it ; the latter is in fact an earlier usage, office as place originally referring to the location of one's duty. When used as an adjective, the...
work" were hard to measure hourly or piecewise, and in part because they did not necessarily draw remuneration from share
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
ownership.
As Japan rapidly industrialized in the 20th century, the idea of office work was novel enough that a new Japanese word (salaryman
Salaryman
refers to someone whose income is salary based; particularly those working for corporations. Its frequent use by Japanese corporations, and its prevalence in Japanese manga and anime has gradually led to its acceptance in English-speaking countries as a noun for a Japanese white-collar...
), was coined to describe those who performed it, and their remuneration.
Salaried employment in the 20th century
In the 20th century, the rise of the service economyService economy
Service economy can refer to one or both of two recent economic developments. One is the increased importance of the service sector in industrialized economies. Services account for a higher percentage of US GDP than 20 years ago...
made salaried employment even more common in developed countries
Developed country
A developed country is a country that has a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue...
, 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 idea of a salary continues to evolve as part of a system of all the combined rewards 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.Salaries in the U.S.
In the United States, the distinction between periodic salaries (which are normally paid regardless of hours worked) and hourly wages (meeting a minimum wageMinimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
test and providing for overtime
Overtime
Overtime is the amount of time someone works beyond normal working hours. Normal hours may be determined in several ways:*by custom ,*by practices of a given trade or profession,*by legislation,...
) was first codified by the Fair Labor Standards Act
Fair Labor Standards Act
The Fair Labor Standards Act of 1938 is a federal statute of the United States. The FLSA established a national minimum wage, guaranteed 'time-and-a-half' for overtime in certain jobs, and prohibited most employment of minors in "oppressive child labor," a term that is defined in the statute...
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
Bona Fide
Bona Fide is a studio album from rock band Wishbone Ash. It is the first studio album in six years and is the only studio album to feature guitarist Ben Granfelt...
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 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). Real median household income in the United States climbed 1.3 percent between 2006 and 2007, reaching $50,233 according to a report released by the U.S. Census Bureau. This is the third annual increase in real median household income.
Salaries in Japan
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.Salaries in 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). Several other companies pay after the month is over, but generally by the 5th of every month. However there are companies pay after this also. For instance, for companies under 'GodrejGodrej
Godrej may refer to:* Godrej family, a wealthy business family in India* Godrej Group, a group of companies founded by the Godrej family* Godrej Infotech Ltd, a group company of Godrej Group* Godrej Industries Ltd, a group company of Godrej Group...
Group', salary is paid on 9th of month for the preceding month. In case 9th is a holiday, it is paid on 10th, and in case both 9th and 10th are holiday, it is paid on 8th.
The minimum wages in India are governed by the Minimum Wages Act, 1948. Details regarding the same can be seen at http://labourbureau.nic.in/wagetab.htm Employees in India are notified regarding their salary increase through a hard copy letters given to them.
See also
- List of countries by monthly average wage
- List of countries in Europe by average wage
- Executive compensationExecutive compensationExecutive pay is financial compensation received by an officer of a firm, often as a mixture of salary, bonuses, shares of and/or call options on the company stock, etc. Over the past three decades, executive pay has risen dramatically beyond the rising levels of an average worker's wage...
- List of countries by average wage
- List of single-digit salary earners
- List of largest sports contracts
- Salaryman (Japan)Salarymanrefers to someone whose income is salary based; particularly those working for corporations. Its frequent use by Japanese corporations, and its prevalence in Japanese manga and anime has gradually led to its acceptance in English-speaking countries as a noun for a Japanese white-collar...
- Peak earning yearsPeak earning yearsPeak earning years refers to the time in life when workers earn the most money per year.-US perspective:Given their initial lack of experience, workers' earnings start out low. Earnings peak when workers hit middle age, then begin to fall as retirement approaches...