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What Does Annual Salary Mean?

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An annual salary is the monetary compensation that an employee receives in exchange for working for a year or a period of time roughly equivalent to a year. Salaries are denominated in the local currency and do not include side benefits. In contrast to wages, salaries are determined on a chronological basis, meaning that they are paid based over a specific period, rather than on an hourly or piece basis.


Employees receive compensation from their employers in exchange for their labor. Compensation can include both money and side benefits such as sick leave and health care plans. Most times, quoted compensation figures do not include taxation and thus can be considered nominal as opposed to real figures.


Most monetary components of compensation are quoted as either a salary or a wage. A salary is the amount that an employee receives in exchange for working over a specific period of time without regard for the precise number of hours worked. For example, an employee with a monthly salary of $2,000 would receive $2,000 that month whether the employee worked 160 or 200 hours.


Wages differ from salaries in that wages are set on a per-unit basis. Units used in the determination of wages paid out can differ dramatically. Some positions use the units of product that the employee has produced while others use the number of hours worked. Using an example of a position that pays wages of $8 per hour, an employee who worked 30 hours would earn $240, whereas an employee who worked 40 hours would earn $320, barring additional legislation.

Other Benefits

For some positions, benefits can comprise a large portion of their compensation while other positions offer no benefits at all. Nonmonetary benefits can include items such as daycare, university tuition, vacation time and housing. These items tend not to be included in quoted numerical figures of compensation, if only because many of them have no easily derived numerical value.


Alan Li started writing in 2008 and has seen his work published in newsletters written for the Cecil Street Community Centre in Toronto. He is a graduate of the finance program at the University of Toronto with a Bachelor of Commerce and has additional accreditation from the Canadian Securities Institute.