Sunday, March 3, 2024

BARBADOS EMPLOYERS’ CONFEDERATION: Salary vs Wage

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DOES IT MAKE A difference if you are paid monthly or if your salary is calculated hourly? Today we explore the difference between salary and wage earners.

I often hear some people say that they prefer to be weekly paid and some others say that monthly earners receive more benefits than weekly wage earners. Is there an actual difference or only a perceived difference?

The overriding factor in any employment relationship is that persons are compensated for services rendered. Whether salary or wage, both are classified as earnings. Employment law does not provide a specific definition of a wage or salary earner.

Some people use the terms wages and salary interchangeably; however, others make the following distinction: the term wages is used where the amount of money the employee receives may vary from one pay period to the next, as the amount paid is directly dependent on the amount of hours worked.

For example, an employee working in an assembly plant might work 40 hours during the work week. If the person’s hourly rate of pay is $15, the employee will receive a pay cheque showing gross wages of $600 (40 x 15).

If the employee had worked only 30 hours during that week, her or his paycheck will show gross wages of $450 (30 x 15).

The term salary refers to an agreed and fixed annual/monthly amount of money the employee receives regardless of the hours worked. For example, the manager of the assembly plant might earn a salary of $78 000 per year or $6 500 per month. Therefore the salary is the same amount for each period.

Overtime – The issue of overtime presents as the most obvious difference between salary and wage earners. Generally, the hourly paid employees will earn wages at the rate of time and one-half for the hours in excess of 40 per week.

The salaried employees in high pay positions are not likely to receive additional pay for the hours in excess of 40 per cent. However, employees with low salaries are usually entitled to overtime pay.

Notice pay – One area where there is a difference between salaried and wage employees relates to notice periods. The Employment Rights Act specifies minimum notice periods which an employer must give to an employee. The notice period is dependent on length of service as well as pay cycle.

Monthly paid workers receive notice periods ranging from one month to two and a half months’ notice of termination. Conversely, hourly, daily or weekly paid employees are entitled to receive notice of one week to ten weeks, depending on length of service.

Deductions – It is often said that monthly paid workers must be paid for the entire month, even if they work one day. What is notable is that Barbadian legislation does not stipulate such.

This argument usually surfaces where the employee is exiting the company, having worked part of the month, or where the employee has exhausted paid sick leave entitlement.

However, I wish to posit two scenarios: Where a salaried employee joins a company on the 15th of the month, should the employee be paid for the entire month or should the salary be prorated accordingly? Where a salaried employee requests two weeks leave without pay, having exhausted his/her vacation entitlement, is the employee entitled to full pay?

In past experience, every person presented with the above scenarios agreed that the salary should be prorated for the period. This is usually on the basis that the employee would not have performed work during the period in question.

As such, I beg to question how is it justifiable to argue that an employee be compensated for a period not worked, and not covered by any leave provisions in the contract of employment or company policy?

Salaried employees are generally allotted a certain number of sick/personal and vacation hours every year. Salaried employees’ pay should not be docked if they call in sick or take personal or vacation days. The only exception is if they have used up all their benefit days and the employer has not granted any additional paid days off.

While some may argue that docking pay in such an instance is disciplinary action, others simply state that compensating an employee for what they have earned and not paying for what has not been earned cannot be seen as discipline. Of note is that American labour law has two classes: Exempt and non-exempt workers.

To be exempt, the employee must meet certain requirements regarding job duties – examples include executives, administrators, professionals – and must be paid on a salary basis.

The Fair Labour Standards Act allows employers to make deductions of an exempt employee’s salary under certain circumstances, including when the employee is absent for one or more full days for personal reasons and when the employee is absent for one or more full days for sickness.

Despite highlighting the similarities and differences above, what is most important is that employers are not only fair but also consistent in their compensation systems, adhering to best practice and labour law.

Employees should highlight any queries on pay and ensure that they read and understand the company policies as well as review and understand the provided pay slips.

Notably the Protection of Wages Act CAP 351 and the Employment Rights Act will provide guidance, and all parties in the employment relationship should aim to be as informed as possible.

* Sheena Mayers is a labour management advisor.

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