A salary is the financial compensation your employee receives in exchange for their work. It can also be called income or pay.
A salary can take various forms. Some employees have a fixed salary and a consistent payout. They get the same amount paid into their bank account regularly, for example, every month.
Some employees might have a provision-based salary, hourly wages, weekend allowances, varying shift-lengths, or bonuses that affect their payouts. Overtime and overtime pay might also increase their payout.
Some employees have a salary that varies each payout.
Difference between gross and net salary
When we discuss salary, we usually divide it into gross and net pay. Gross pay refers to the total amount that the employee earns before any deductions, such as income tax and pension contributions.
Net pay represents the actual amount the employee receives for their work.
When you and your employee negotiate their salary, you use gross pay as a reference, even though net pay is the actual money the employee will get paid into their bank account. That’s why it’s important for employers and employees to understand these terms.
Salary isn’t the only expense you’ll have if you have employees. Labor costs encompasses both direct costs—such as salaries and bonuses—and indirect costs such as social events, sick leave and vacation pay.
What you have to do as an employer
As an employer, you have to provide employees with a detailed payslip which outlines their earnings and deductions. For employees with a varying payout, this is especially important. Employees with a fixed payout might find their payslip more predictable, since it is the same every month. Even so, you have to provide a payslip.
Managing salaries for employees is also called doing payroll, and it’s usually done in a payroll software.
As an employer, you’re also responsible for deducting income tax, setting aside pension contributions, setting up valid work insurance for your employees, creating a safe workplace environment in accordance with safety regulations, and treating employees fairly.