Salary vs. Allowance — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Updated on November 3, 2023
Salary is a regular payment for employment, typically quoted annually. Allowance is a set amount given regularly for a specific purpose, not necessarily tied to a job.
Difference Between Salary and Allowance
Table of Contents
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Key Differences
Salary is the fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee, especially a professional or white-collar worker. Allowance, on the other hand, refers to a sum of money allotted regularly, often for a specific purpose, such as a travel or food expense, and is not necessarily payment for work done.
While salary is generally taxable and constitutes the main source of income for an individual, an allowance can be both taxable or non-taxable depending on its type and purpose. For instance, an allowance may be provided to cover business expenses, which can be tax-free, while salary is subject to income tax as it is considered earned income.
Salaries are usually part of a contractual agreement between an employer and an employee and are often reflective of the employee’s role, experience, and market rates. Allowances, however, may be more flexible and can be adjusted or eliminated by the payer based on circumstances, such as a change in business needs or cost-cutting measures.
While salary is a key component in determining an individual’s financial health and is typically used in calculations for loans and credit, an allowance is often supplementary and may not be considered as stable income. For example, lenders usually consider salary for loan approvals, while allowances may not be guaranteed and thus not included.
Lastly, salary is a fundamental aspect of employee compensation that is expected to be provided by the employer as a reward for the employee's work. An allowance, while it may be a regular part of some compensation packages, often serves to defray specific costs and is not directly tied to the performance or duties of the job itself.
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Comparison Chart
Definition
A fixed regular payment for work performed, typically quoted annually.
A sum of money given for a particular purpose, often periodically.
Purpose
Compensation for job performance and responsibilities.
To cover specific expenses, such as travel or meals.
Tax Implications
Usually subject to income tax as earned income.
May be taxable or non-taxable, depending on its use.
Stability
Considered stable income, reflecting job security.
Can be variable and sometimes discretionary.
Usage in Financial Assessments
Often used in credit evaluations and loan approvals.
Typically not considered stable income for credit evaluations.
Compare with Definitions
Salary
A periodic payment from an employer to an employee, often expressed as an annual amount.
Her salary as a software developer enabled her to buy a new house.
Allowance
An amount of money given regularly for a specific purpose.
His job provided a travel allowance for overseas assignments.
Salary
Regular payment for employment, not contingent on the number of hours worked.
The teacher's salary was paid over the summer months as well.
Allowance
Financial support given to someone, often dependent on the giver.
The student's allowance from her parents was cut after she got a part-time job.
Salary
The financial return on employment before taxes and other deductions.
The advertised salary for the position does not include performance bonuses.
Allowance
A sum of money allotted for a particular need or expense.
The company gives an allowance for employees to upgrade their home office.
Salary
A fixed amount of money paid to an employee at regular intervals.
They set aside a portion of their salary each month for retirement.
Allowance
A fixed quantity of something that is permitted, especially within a set of regulations.
His daily calorie allowance was limited as part of his diet plan.
Salary
Compensation received by an employee for services rendered to an organization.
He negotiated a higher salary upon being promoted.
Allowance
The act of allowing.
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis.
Allowance
An amount that is allowed or granted
Consumed my weekly allowance of two eggs.
Salary
A fixed regular payment, typically paid on a monthly basis but often expressed as an annual sum, made by an employer to an employee, especially a professional or white-collar worker
He received a salary of £24,000
A 15 per cent salary increase
Allowance
Something, such as money, given at regular intervals or for a specific purpose
A travel allowance that covers hotel bills.
Salary
Pay a salary to
The Chinese system—salary the doctor and stop his pay when you get ill
Allowance
A small amount of money regularly given to a child, often as payment for household chores.
Salary
Fixed compensation for services, paid to a person on a regular basis.
Allowance
A price reduction, especially one granted in exchange for used merchandise
The dealer gave us an allowance on our old car.
Salary
A fixed amount of money paid to a worker, usually calculated on a monthly or annual basis, not hourly, as wages. Implies a degree of professionalism and/or autonomy.
Allowance
To put on a fixed allowance
Cut expenses by strictly allowancing the sales representatives.
Salary
To pay on the basis of a period of a week or longer, especially to convert from another form of compensation.
Allowance
To dispense in fixed quantities; ration.
Salary
(obsolete) Saline.
Allowance
Permission; granting, conceding, or admitting
Salary
Saline
Allowance
Acknowledgment.
Salary
The recompense or consideration paid, or stipulated to be paid, to a person at regular intervals for services; fixed wages, as by the year, quarter, or month; stipend; hire.
This is hire and salary, not revenge.
Allowance
An amount, portion, or share that is allotted or granted; a sum granted as a reimbursement, a bounty, or as appropriate for any purpose
Her meagre allowance of food or drink
Being a volunteer is unpaid, but we get accommodation and a living allowance of 100 euros a week.
Salary
To pay, or agree to pay, a salary to; to attach salary to; as, to salary a clerk; to salary a position.
Allowance
Abatement; deduction; the taking into account of mitigating circumstances
To make allowance for his naivety
Salary
Something that remunerates;
Wages were paid by check
He wasted his pay on drink
They saved a quarter of all their earnings
Allowance
(commerce) A customary deduction from the gross weight of goods, differing by country.
Tare and tret are examples of allowance.
Allowance
(horse racing) A permitted reduction in the weight that a racehorse must carry.
On the Flat, an apprentice jockey starts with an allowance of 7 lb.
Allowance
A child's allowance; pocket money.
She gives her daughters each an allowance of thirty dollars a month.
Allowance
(minting) A permissible deviation in the fineness and weight of coins, owing to the difficulty in securing exact conformity to the standard prescribed by law.
Allowance
(obsolete) Approval; approbation.
Allowance
(obsolete) License; indulgence.
Allowance
(engineering) A planned deviation between an exact dimension and a nominal or theoretical dimension.
Allowance
(transitive) To put upon a fixed allowance (especially of provisions and drink).
The captain was obliged to allowance his crew.
Allowance
(transitive) To supply in a fixed and limited quantity.
Our provisions were allowanced.
Allowance
Approval; approbation.
Allowance
The act of allowing, granting, conceding, or admitting; authorization; permission; sanction; tolerance.
Without the king's will or the state's allowance.
Allowance
Acknowledgment.
The censure of the which one must in your allowance o'erweigh a whole theater of others.
Allowance
License; indulgence.
Allowance
That which is allowed; a share or portion allotted or granted; a sum granted as a reimbursement, a bounty, or as appropriate for any purpose; a stated quantity, as of food or drink; hence, a limited quantity of meat and drink, when provisions fall short.
I can give the boy a handsome allowance.
Allowance
Abatement; deduction; the taking into account of mitigating circumstances; as, to make allowance for the inexperience of youth.
After making the largest allowance for fraud.
Allowance
A customary deduction from the gross weight of goods, different in different countries, such as tare and tret.
Allowance
To put upon a fixed allowance (esp. of provisions and drink); to supply in a fixed and limited quantity; as, the captain was obliged to allowance his crew; our provisions were allowanced.
Allowance
An amount allowed or granted (as during a given period);
Travel allowance
My weekly allowance of two eggs
A child's allowance should not be too generous
Allowance
A sum granted as reimbursement for expenses
Allowance
An amount added or deducted on the basis of qualifying circumstances;
An allowance for profit
Allowance
A permissible difference; allowing some freedom to move within limits
Allowance
A reserve fund created by a charge against profits in order to provide for changes in the value of a company's assets
Allowance
The act of allowing;
He objected to the allowance of smoking in the diningroom
Allowance
Put on a fixed allowance, as of food
Allowance
A sum regularly allotted to cover personal or household expenses.
The children received a weekly allowance for doing chores.
Common Curiosities
Is salary only for full-time employment?
No, salary can be paid for part-time positions as well, depending on the terms of employment.
Is a salary always paid on an annual basis?
No, salary is typically paid monthly or biweekly but is often expressed as an annual figure for comparison purposes.
Can allowances form part of a salary package?
Yes, allowances can be included in a salary package to cover certain expenses or as additional compensation.
Are salaries always subject to income tax?
In most cases, salaries are subject to income tax, but the exact tax implications can vary by jurisdiction.
Can an allowance be considered income?
Yes, an allowance can be considered income, especially if it's not tied to actual expenses and is taxed.
What's a salary cap?
A salary cap is a limit on the amount of salary an organization can spend on its employees, common in professional sports.
Are salaries negotiable?
Yes, salaries are often negotiable based on an employee's skills, experience, and market rates.
What determines the size of an allowance?
Allowances are determined by the giver and can be based on the actual cost of expenses or a predetermined rate.
Is a salary paid if an employee is on leave?
Typically, employees on certain types of leave, like vacation or sick leave, still receive their salary.
Does a salary include overtime pay?
No, overtime pay is usually separate from the salary and paid for extra hours worked beyond the normal schedule.
Can an employer stop giving allowances?
Yes, an employer can typically stop or adjust allowances unless they are contractually obligated.
Do allowances change often?
Allowances can change based on policy, cost of living adjustments, or the discretion of the provider.
Can an allowance be given in non-monetary form?
Yes, allowances can be provided as goods or services, like a housing or car allowance.
Are travel allowances always tax-free?
Not always; tax treatment for travel allowances depends on whether they are used for business purposes and align with tax regulations.
Do salary and allowance both count for retirement contributions?
Salary definitely counts for retirement contributions, while allowances may count if they are considered part of taxable income.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
