The difference between salary and wage: gross pay, super, and tax explained

What is the difference between salary and wage?

In Australia, the terms 'salary' and 'wage' are often used interchangeably, but they have distinct meanings in employment law and pay practice. The difference between salary and wage affects how your gross pay is calculated, how superannuation is applied, and how tax is withheld. Understanding this difference helps you compare job offers and see where your earnings sit against the national benchmarks like the Salary Index.

Wage: paid by the hour

A wage is typically paid according to the number of hours worked. Employees on a wage receive an hourly rate, and their total pay varies each pay period depending on shifts, overtime, and penalty rates. Most award-covered employees are paid a wage. The Fair Work Ombudsman explains that the National Minimum Wage (from 1 July 2026, $26.44 per hour or $1004.90 per week) is a wage floor for employees not covered by an award. Many modern awards set higher minimum hourly rates.

For example, an entry-level award floor is $25.74 per hour. If you work 38 hours in a week at that rate, your gross wage is $978.12. If you work overtime or on weekends, penalty rates increase your pay. Your gross pay is not fixed – it depends on the hours you actually work.

Salary: a fixed annual amount

A salary is a fixed annual amount paid in equal instalments, regardless of the exact hours worked each week. Salaries are common in professional, managerial, and administrative roles. The Fair Work Ombudsman notes that a salary under an employment contract can 'offset' minimum entitlements from an award, such as penalty rates, overtime, and allowances. This is known as a contractual offsetting arrangement.

For instance, if your contract says you earn a salary of $90,000 per year, you receive $3,461.54 per fortnight before tax, even if some weeks you work more than 38 hours. The salary is meant to cover all the work you do, including reasonable overtime. However, the salary must still meet the National Minimum Wage and, if an award applies, must not leave you worse off than the award would.

Annualised wages: a hybrid

Some awards allow an 'annualised wage' – a fixed regular amount each pay period that covers minimum pay rates, penalties, overtime, allowances, and annual leave loading. This is different from a salary because it is governed by award rules. The Fair Work Ombudsman says the annualised wage must be reviewed every 12 months to ensure it is at least equal to what the employee would have earned under the award. If it falls short, the employer must pay the difference.

How the difference between salary and wage affects gross pay

Your gross pay is the amount before tax and other deductions. For a wage earner, gross pay varies each period. For a salary earner, it is predictable. This affects budgeting, but both are measured against the same national benchmarks.

The Salary Index sets 100 as full-time adult ordinary-time earnings: $2,083.70 per week, annualised to $108,352 (ABS Average Weekly Earnings, May 2026). The National Minimum Wage annualised is $52,255, giving an index of 48.2. So a wage at the national minimum sits well below the average full-time salary.

If you are offered a salary of $80,000, your index is about 73.8. If you are offered a wage of $30 per hour for 38 hours a week, your annualised gross is $59,280, index 54.7. But remember, a wage earner may also get penalty rates that push their actual pay higher.

Superannuation and the difference between salary and wage

Superannuation guarantee contributions (12% from 1 July 2026) are calculated on an employee's ordinary-time earnings. For wage earners, this is straightforward: super is paid on each hour of ordinary-time work at the hourly rate. For salaried employees, the salary figure is usually the ordinary-time earnings base, unless the contract specifies otherwise.

A common point of confusion is whether a salary is quoted 'including super' or 'plus super'. If a salary is $100,000 plus super, your total remuneration is $112,000 (with 12% super). If it is $100,000 including super, your ordinary-time earnings are about $89,286 and super is $10,714. Always check which applies.

The maximum super contribution base for 2026–27 is $270,830. Earnings above that do not attract compulsory super.

Tax implications

Both salary and wage are taxed as ordinary income under the same marginal tax rates. For 2026–27 (excluding Medicare):

• Nil up to $18,200
• 15% from $18,201 to $45,000
• 30% from $45,001 to $135,000
• 37% from $135,001 to $190,000
• 45% above $190,000

Plus a 2% Medicare levy. The difference between salary and wage mainly affects PAYG withholding. Wage earners with variable hours may have irregular withholding, while salary earners have consistent deductions. Both can use the tax-free threshold.

Where your pay sits on the index

The Salary Index shows how different industries compare. For example, Mining has an index of 154.7, while Retail trade is 75.9 and Accommodation and food services is 72.5. State differences also matter: Western Australia indexes 106.9, Tasmania 88.6.

If you are on a wage under a retail award, your pay might be around the industry average of 75.9. If you are on a salary in professional services (index 114.7), you are above the national line.

Practical example

Consider two roles:

• Wage role: Casual hospitality worker, $33.05 per hour (including casual loading). Working 25 hours a week, annualised gross $42,965, index 39.7. Super is 12% on ordinary hours (excluding loading).
• Salary role: Full-time administrative officer, $65,000 per year plus super. Annualised gross $65,000, index 60.0. Super is $7,800.

Both are below the national average, but the salary offers predictable income and may include leave entitlements that the casual wage does not.

Key takeaways

The difference between salary and wage comes down to how pay is structured: fixed annual amount versus hourly rate. Both must meet minimum legal standards. When comparing jobs, look at the total package including super, and use the Salary Index to see where your pay sits against the national line. For award-specific rates, check pay guides or your industry award.

Always read your employment contract carefully. If you are on an annualised wage, ensure your employer reviews it annually. If you are on a salary, confirm whether it covers all award entitlements. The Fair Work Ombudsman provides resources to help you understand your rights.

Remember: the index is a benchmark, not a guarantee. Your actual pay depends on your award, agreement, or contract. Use the states page to see regional differences, and industries to see how your field compares.