Salary

From Wikipedia, the free encyclopedia

A salary is a form of periodic payment from an employer to an employee, which is specified in an employment contract.

From the point of view of running 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.

1 Etymology
2 History
3 Salaries in the US
4 Salary and Gross Pay
5 External links

[edit] Etymology

Salary derives from the Middle English salaire, from the Latin word salarium, a payment made in salt (sal) or for salt, from salarius meaning pertaining to salt.

[edit] History

While there is no first pay stub documenting 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 village or city during the Neolithic Revolution, sometime between 10,000 BC and 1,000 BC.

By the time of the Hebrew Book of Ezra (550 BC to 450 BC), accepting 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 monarchy 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."

Similarly, the Roman word salarium linked employment, salt and soldiers, but the exact link is unclear. The least common theory is that the word soldier 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.

Regardless of the exact connection, the salarium paid to Roman soldiers has defined a form of work-for-hire ever since in the Western world, 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 merchantile colonies, salaried employment appears to have been relatively rare and mostly limited to government service. More commonly, servitude either received no pay, as with slavery, serfdom, and indentured servitude, or received only fraction of what was produced, as with sharecropping. Other common alternative models of work included self- or co-operative employment, as with artisan guilds, or communal work and ownership, as with medieval universities and monasteries.

Even many of the jobs initially created by the Commercial Revolution in the years from 1520 to 1650 and later during Industrialisation in the 1700s and 1800s 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). In corporations of this time, such as the several East India Companies, many managers would have been remunerated as owner-shareholders. Such a remuneration scheme is still common today in accounting, investment, and law firm partnerships where the leading professionals are equity partners, and do not technically receive a salary, but rather make a periodic "draw" against their share of annual earnings.

From 1870 to 1930, the Second Industrial Revolution 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 1900s, 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.

In the 20th century, the rise of the service economy 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.

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 variable pay (such as 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.

[edit] Salaries in the US

In the United States, the distinction between periodic salaries (which could be paid regardless of hours worked) and hourly wages (meeting a minimum wage 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. The tests for all six categories were revised effective August 23, 2004.

The six categories of salaried workers exempt from overtime provisions are: (1) Executive Employees, who hire, fire and direct others; (2) Administrative Employees, exercising discretion as part of office work; (3) Learned Professional Employees, such as doctors, lawyers, professors; (4) Creative Professional Employees in an artistic field; (5) Computer Employees, who must meet certain threshold tests; and (6) Outside Sales Employees, who must work away from an employer's place of business. Some of the 2004 exemption tests depend on being paid a weekly salary of greater than $455, even though no hourly minimum wage is required or maximum number of hours worked is established.

[edit] Salary and Gross Pay

Salary is sometimes called "base pay" to distinguish it from other types of cash pay. Based on their actions in a job, employees may also receive overtime pay, incentive pay, bonuses, or commissions. Some benefits, such as relocation per diems and disability insurance premiums may also have a taxable cash value. The sum of all money promised and paid in a given period is termed the Gross Pay for that period by payroll processors, but may be referred to as Total Cash Compensation by compensation analysts.