Type of Wages: Everything You Need To Know

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This article will provide an overview of the various types of wages available so that you can understand exactly what’s on your payslip.

What are wages?

Professionals receive monetary compensation for their work hours, referred to as wages. The amount and distribution method of wages depends on the employer's payroll policies and other factors, such as legal restrictions. Wages are generally paid bi-weekly or monthly, depending on the employer and employee's agreement.

Why is it important to understand different types of wages?

Understanding the various types of wages is crucial as it can aid you in making significant career decisions. Here are some ways you can benefit from comprehending the different types of wages:

  • Allows you to narrow your job search criteria: By comprehending the components of wages, such as pay frequency, salary range, and supplementary benefits, you can refine your job search preferences. This way, you can focus on finding job opportunities and employers offering the compensation and benefits you seek.

  • Helps you negotiate compensation with employers: You can research the wages typically offered by employers for your job role once you understand the various types of wages. This information can help you negotiate better pay rates and additional benefits with your current or potential employers, such as overtime pay.

  • Gives you the knowledge you need to convert wages to weekly, monthly, or yearly earnings: When searching for jobs, you can utilize your knowledge of different wage types to convert salary or hourly pay ranges accurately. For instance, if a job listing mentions a pay rate of $50 an hour, you can calculate how much money you will make in a year if you work that job for full-time hours.

  • Provides accounting and payroll professionals with marketable knowledge: Knowing various wage structures can enhance your qualifications and enable you to offer valuable insights on pay-related matters in the workplace, particularly if you work in payroll, accounting, or finance.

Different types of wages and examples of jobs that offer them


Wages come in different forms and are crucial to understanding the compensation structures for various jobs. Here are the different types of wages and examples of jobs that usually offer them:

1) Salary

A salary refers to a predetermined amount of money an employer pays to an employee annually. The payments are usually spread throughout the year, according to the employment contract. Jobs typically offer salaries include IT specialists, HR generalists, marketing managers, accountants, business development coordinators, physicians, registered nurses, and retail store buyers.

2) Hourly Wage

Hourly wages are a type of wage where employers pay employees for each hour worked. This type of wage is common for part-time employment and sometimes full-time employment. Jobs that offer hourly wages include retail, healthcare assistance, sales, and construction.

3) Commissions

Commissions are typically offered to sales professionals by their employers in addition to hourly pay or salaries. Employees earn a percentage of money from each sale they make. Examples of jobs typically offering commissions include sales representatives, retail store associates, talent acquisition specialists, and wholesale agents.

4) Fair Wage

A fair wage is a wage that employers offer their employees. It considers factors like the cost of living in a particular area and typical wages for a job position. Fair wages usually act as a midway point between minimum wage and a living wage. Jobs typically receive fair wages, including housekeepers, virtual assistants, retail sales managers, home health aides, and tech support specialists.

5) Overtime

Overtime wages are paid to employees for any work they complete that exceeds 40 hours per week. Typically, overtime pay includes double an employee's average earnings during a 40-hour work week. Examples of jobs that usually offer overtime include registered nurses, truck drivers, construction workers, tradespeople, EMTs, and IT specialists.

Useful Read: Time Off in Lieu (TOIL): Balancing Employee Rewards and Work-Life Harmony

6) Severance Pay

Severance pay refers to the type of wage employers pay to employees they have to let go. The severance pay an employee receives usually coincides with the years they've worked at the company. For instance, an employee who worked for a company for three years would likely get three weeks of severance pay to help their transition.

Useful Read: What is Statutory Redundancy Pay? A Guide for UK Employers

7) Prevailing Wage

A prevailing wage is typically used in government contracting between agencies and outside businesses. The U.S. Department of Labor provides various data to help determine recommended payments for contractual workers. Prevailing wage may differ depending on the state where a professional works contractually with the government. Jobs that may receive prevailing wages include civil engineers, urban planners, mechanics, construction workers, and construction supervisors.

8) Living Wage

Living wage refers to the minimum amount of money an employer can offer an employee. Living wage is different from minimum wage because employers don't have to follow legal guidelines like they would if they offered minimum wage to employees. Examples of jobs that may receive living wages include receptionists, mail carriers, hair stylists, nannies, and waiters.

9) Minimum Wage

The minimum wage refers to the set hourly rate the U.S. Department of Labor decides upon. This figure varies depending on the state the individual works in. Jobs that offer minimum wage include cashiers, grocery store clerks, dishwashers, and daycare assistants.

10) Bonuses

Bonuses are cash compensation that employers provide to employees for producing good work. Bonuses don't factor into salaried or hourly earnings and aren't guaranteed to employees. This type of wage usually acts as an incentive for employees to reach a certain level of productivity. Jobs that may offer bonuses include salespersons, marketing specialists, recruitment specialists, and general managers.

11) Vacation Pay

Vacation pay is the money employers compensate employees for when they take time off from work. This type of wage may vary depending on the employee's job position. For example, a nurse might receive more vacation pay than someone in retail. Employees eligible to receive vacation pay typically get two weeks of paid leave each year.

12) Paid time off

Paid time off refers to the money employers pay employees for taking days off from work when needed. This type of wage is usually provided as an additional benefit to employees and is paid out in addition to their regular salary or hourly wage. Jobs that may offer paid time off include nurses, customer service representatives, legal assistants, teachers, and librarians.

These are just some of the types of wages you might find on your payslip. Understanding each type will help you better understand how much you earn for your work. Reading and interpreting your payslip is integral to managing your finances and budgeting for the future. Knowing what different wage types mean can also help you negotiate a better salary or rate of pay if needed. With the proper knowledge, you can maximize your income and ensure you're paid what you're worth.

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Topic: Wages
Rinaily Bonifacio

Written by:

Rinaily Bonifacio

Rinaily is a renowned expert in the field of human resources with years of industry experience. With a passion for writing high-quality HR content, Rinaily brings a unique perspective to the challenges and opportunities of the modern workplace. As an experienced HR professional and content writer, She has contributed to leading publications in the field of HR.


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