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Salary Vs Payroll

Updated: Aug 27, 2022

To the naked eye, what’s the difference between payroll and salary? Quite simply, they are both compensations paid to an employee, but they differ in how that payment is calculated and made. Let’s take a look at the pros and cons of each system, so you can decide which works best for your business needs.

What Is The Difference Between Salary And Payroll?

When it comes to money, there are a lot of terms that get thrown around. Salary and payroll are two of those terms. They both relate to income, but they are different. Here’s a breakdown of the difference between salary and payroll.

Salary is an amount paid for work done in return for goods or services. It's often seen as a reward for someone's time or talent. A salary does not include benefits such as health insurance, life insurance, and retirement savings plans.

Payroll is the total amount of wages paid by an employer to its employees over a specific time usually one month or one year (i.e., hourly wage x number of hours worked). The salaries do not include benefits such as health insurance, life insurance, and retirement savings plans.

How Are They Different?

The biggest difference between salary and payroll is that salary is a fixed amount paid to an employee regardless of how many hours they work, while payroll is a record of the total amount paid to employees in a given period. Salaries are often based on experience and skill set, while payroll is based on the number of hours worked. Salaries are paid out regularly (usually weekly or bi-weekly), while payroll is typically paid out once a month. Salary earners are usually exempt from overtime pay, while those on the payroll are not. Salary earners may also be eligible for benefits, such as health insurance and retirement plans, while those on payroll typically are not. Finally, salaries are taxed at a higher rate than payroll, since they are considered earned income.

Which Is Better?

When it comes to money, there are a lot of factors to consider. Two important considerations are salary and payroll. So, which is better? Salary vs payroll can be confusing, but we're here to help clear things up. Here's a breakdown of the two

Salary: salary is typically how much an employee gets paid in one payment at the end of the month, or in one pay period. The benefit with this type of payment is that employees get their money sooner, rather than waiting for payday.

Payroll: payroll refers to when employers withhold taxes from each paycheck and send them off to be processed. With this system, employees don't have to worry about paying taxes themselves since they will automatically be deducted by the employer.

One downside of payroll is that sometimes people have too much withheld, which leads to not having enough cash on hand.

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