Earning Types Definition

Term Definition
Small business owners pay employees to work for them. Employers establish the rules for how, when and where work is performed. They issue payroll checks for various earning types, including wages, salaries and overtime pay that contribute to an employee’s gross income.

Extended Definition
The Internal Revenue Service defines an employee as someone who performs work for an employer, who mandates what will be done and how it is done. Employees receive compensation for these services. Earning types include wages, salaries, and overtime pay. 

Typically, wages are calculated by multiplying the hours worked by an hourly rate. Employers usually determine the rate by the employment category, such as supplemental, hourly, premium, overtime, salary, paid leave, shift differential or standby. Alternatively, employers pay salaries, fixed sums of money paid for a specific time period, such as weekly, monthly, or yearly. Some employees also receive tips from customers or clients for the quality of service performed, including hair stylists, waiters, baggage handlers, and other workers who offer personal services.

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