A wage is compensation paid to employees for work for a company during a period of time. Wages are always paid based on a certain amount of time. This is usually an hourly basis. This is where the term hourly worker comes from. Other forms of compensation include salary and commissions.
Explanation :
Lower level employees are paid based on the amount of time worked. These employees usually have a timesheet or time card to keep track of the hours worked per week. Most modern employers have computerized systems to keep track of hourly employee hours.Employees must log into the system and log out to record their hours worked. Depending on the state, these employees are then paid once a week or once every other week. Hourly employees must receive overtime benefits if they work more than 40 hours each week.
In a nutshell :
- A wage expense is the cost incurred by companies to pay hourly employees.
- The wage expense line item may also include payroll taxes and benefits paid to the employee.
- Wage expenses are variable costs and are recorded on the income statement.
- Under the accrual method of accounting, wage expenses are recorded when the work was performed as opposed to when the worker is paid. Under cash accounting, wage expenses are reported only when the worker is paid.
- Wage expenses that are not yet paid are recorded as wages payable on the balance sheet, which is a liability account.
- Salary expenses differ from wage expenses as they are not hourly but rather quoted annually. Wage expenses can incur overtime whereas salaried jobs do not include overtime pay.
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