What is a salary?

If you’re starting your first job or transitioning from being paid an hourly wage, it’s helpful to know how a typical salary works. A salary is how much money you will be paid to do your job. It’s typically a fixed amount of money that’s paid at regular intervals over the course of a year. An annual salary is the total amount earned over 12 months, while a monthly salary refers to the amount earned in a particular month. 

That’s the simple definition. A more complete definition of salary includes a breakdown of how salaried employees are paid and how salary differs from hourly pay. The terms salary and wages are often talked about together, but they do have differences and it’s important to understand these differences before accepting a job offer. 

So, let’s explore the definition of salary in more detail.

When you see the word “salary” next to a job description or in a job offer, it typically refers to an annual salary—a fixed amount of money the employer will pay you in a year. (Some employers may list monthly salaries, but that’s rarer and will likely be specifically called out.) 

Some job postings don’t include a salary or may include a range of possible salaries, but you can always ask for more information before you accept any job offer. Your exact salary should be included on any employment contract you sign, and the contract should also specify the number of hours you’ll be expected to work on a weekly, monthly, or annual basis. 

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If you succeed in getting a job with a company that offers a set salary, you’ll then become a salaried employee. This working relationship is defined by a contract of employment, which specifies your salary amount,  the frequency at which you’ll be paid, and the hours you’ll be expected to work—among other important terms of employment.

The exact amount of money you’ll be paid as a salaried employee will depend on a number of factors, including:

• Your work experience 
• The field you work in and the type of business you work for
• The company’s location and cost of living in that market
• Your ability to negotiate a better salary

Though the frequency at which a salary is paid out differs from company to company, you’ll typically receive a fixed sum of money at least once per month in exchange for that month’s work.

Again, the frequency of salary payment depends on the details in your contract and the type of work you do for the company. In many cases, salary is paid out in monthly installments. And in some cases, you may be paid out twice a month or even on a weekly basis.

But how is your salary paid? Here are three methods you should be familiar with:

• Direct deposit. The most popular method of payment is through a direct deposit into your bank account, also referred to as an electronic funds transfer (EFT). With an EFT, the money will automatically be sent to your account every month. This may take some time to set up initially, but it’s also incredibly convenient, as the money lands directly in your account on payday.
• Paycheck. Alternatively, you might receive your salary in the form of a physical paycheck. You would need to then deposit this paycheck with your bank so the money can ultimately reach your bank account. 
• Mobile wallet. Mobile wallets are another form of payment that is increasing in popularity. With this option, your money is put into an electronic account on your phone. 

Make sure to ask your employer exactly how you’ll get paid when you start a new job. Typically you’ll receive a direct deposit on a certain day or date of the month. For example, this may be on the last Friday of each month. This will be detailed in a payslip that outlines your gross salary (the total amount you’re paid) as well as your net salary (the money that ends up in your bank account, after deduction for social security, healthcare and other costs).

Your hours of work will be different depending on what job you’re doing and the company. As a general guideline, a full-time salaried employee typically works around 35 to 40 hours a week. These hours are sometimes spread over a five-day work week, with a typical working pattern of seven to eight hours a day. (This may not be the case if you have a job that involves night shifts or early-morning work.) 

The contract you sign with the company you’re working for will detail the number of hours you need to work. It can be quite common for people to work more than the hours in their contract to get the job done, but not all employees are paid for this additional time. Some employers offer to pay for extra hours spent, and this time is called overtime.

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Salary pay has some advantages and disadvantages vs. hourly pay. Here are some points to consider.

 Some of the benefits of salary pay are that you will get a consistent, regular amount of money going into your bank account each month. This can make life easier in terms of planning your finances and managing your budget because you know how much money you will be getting each month. Work that is paid at an hourly rate will vary depending on the company and the type of work. This can sometimes make it more difficult to plan your finances. 

When receiving a salary, the amount you’re paid does not change even when you go on holiday or get sick. The only time it might vary is if you work extra hours and receive overtime pay. If you’re being paid by the hour, you only earn money for the work you complete, which means you typically will not get paid if you’re on holiday or sick leave. It might be worth weighing what is most important to you if you are looking for a new job.

 As part of your employment contract, you agree to work a certain number of hours a day or week for your employer. If you work more hours, it can be difficult to claim payment for overtime if this isn’t previously agreed with your employer. Being paid overtime is quite common for people working on an hourly rate. 

 The frequency of payment and amount of money you are paid on a salary is usually always the same. This can be a disadvantage if you need more money for a certain treat or trip, or if there is an unexpected emergency. You typically can’t work more to earn more when receiving a salary.

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 The best way to stay in control of your finances and budgeting is to get your salary paid directly into your account. This is simple to do and can help ensure that you always have enough money in your account to cover your regular expenses, such as monthly rent. If you’re already getting your salary paid into one bank account but are thinking of switching to N26, our free account switcher easily transfers all your direct deposits into your new account, so everything is set up automatically for you.

 With N26 Spaces, create up to 10 sub-accounts that sit alongside your main account. Give each a unique name and savings goal, then set up Rules to transfer funds to your spaces automatically. 

 If you haven’t set up direct deposit before, getting your salary paid into your N26 account is easy. All you need to do is provide your employer with your N26 International Bank Account Number (IBAN) and they’ll transfer your monthly salary to you using the Single Euro Payments Area (SEPA). What are you waiting for? Find the perfect N26 bank account for you today.