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How does salaried pay work?

  • November 14 2019
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How does salaried pay work?

By Louise Chan
November 14 2019

How you receive your pay at work depends on the status of your employment with a company. You may either be a salaried employee or an hourly employee. 

How does salaried pay work

How does salaried pay work?

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  • November 14 2019
  • Share

How you receive your pay at work depends on the status of your employment with a company. You may either be a salaried employee or an hourly employee. 

How does salaried pay work

If you are a salaried employee, you receive a fixed pay each month, which is calculated from the annual pay that you and your employer agreed upon.

Most, if not all, salaried employees receive benefits such as paid sick days and holidays but don’t receive overtime pay unless allowed by the employer.

If you are paid by the hour, you are only paid for the number of hours you work in a month, regardless of your workload. 

Hourly employees are entitled to overtime pay for hours worked in excess of 38 hours per week, but don’t receive paid sick days and holidays. However, some companies also arrange a “time off in lieu (TOIL)” in exchange for overtime pay.

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How is monthly salary calculated?

Salaried employees are paid a fixed salary and their gross monthly income is calculated by dividing their annual salary by 12.

For instance, if your salary is $50,000 annually, your gross monthly income is $50,000 divided by 12. This means that you can expect $4,166.67 monthly or $2,083.33 fortnightly.

However, the amounts above are still subject to taxes and, if applicable, medicare levy.

Hourly employees are paid a fixed rate for each hour they work plus overtime pay for hours worked in excess of 38 hours in a week. The overtime pay is calculated as 1.5 times the employee’s hourly rate for the first two or three hours, and double time thereafter.

This means that the monthly salary of hourly employees may change depending on the number of hours they work in a month.

To compute for the gross monthly income of hourly employees, you’ll need to use the formula below:

gross monthly income = hourly rate x hours worked per week x 52 ÷ 12

The wages received are also subject to taxes and medicare levy if the annual income exceeds the tax-free threshold amounting to $18,200.

How does salaried pay work?
How does salaried pay work
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About the author

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Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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