Understanding what the term ‘salary’ means and why so many have it wrong

Salary – an excellent way of paying people as it is good for the employee and the business.

I was once paid a salary and the communication and understanding from that practice of what a salary was, was wrong.

I was told it meant this was my fee for working per year, I would be taxed of course but any overtime that I did would not be paid for as I was being paid X amount to do my job. I was not allowed to come in late or leave early if I was ahead, but I was expected to do overtime for free.  I was doing a good 10 hours a week overtime too, so the culture was that I was expected to work for free.

By law there is no such culture!

This is unfortunately the perception that many business owners have of a salaried paid employee, and this is wrong.

A salaried person means they are paid say 30k a year and then every month they are paid £2500. They are taxed on this amount.

For any overtime that they do outside of their contracted hours they are either paid or given time off in lieu.

It is a great idea to salary your team and then it is much easier for you to manage cashflow, the only additions are for overtime if you pay for overtime.

I advise that you do pay for overtime at a flat rate (for a 30K salary that would be £14.42 an hour) rather than have time in lieu as that is another headache for the manager to work out!




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