What is a 'Wage Expense'

Wage expense is the cost incurred by companies to pay hourly employees. This line item may also include payroll taxes and benefits paid to employees. Wage expense may be recorded as a line item in the expense portion of the income statement.

BREAKING DOWN 'Wage Expense'

Wage expenses are sometimes reported by department, and they are most likely to be reported separately for the production department. This department is often the one with the most hourly employees. On the other hand, wage expenses for production workers may be incorporated into the cost of goods sold (COGS) item on the income statement. 

Wage expenses vary from one period to the next, depending on the number of business days in the period and the amount of overtime to be paid. Business days vary from month to month and may be affected by the number of holidays during the period.   

Under the accrual method of accounting, wage expenses are recorded based on when the work was performed. In contrast, under the cash method of accounting, wage expenses are recorded at the time the payments are made.

  1. Living Wage

    Living wage refers to a theoretical wage level that allows an ...
  2. Cash Wages

    Cash wages include any kind of compensation that comes in the ...
  3. Justified Wage

    A justified wage refers to income determined by market dynamics, ...
  4. Real Income

    Real Income is the income of an individual or group after taking ...
  5. Cash Accounting

    Cash accounting is an accounting method in which receipts are ...
  6. Accounting Method

    Accounting method refers to the rules a company follows in reporting ...
Related Articles
  1. Trading

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  2. Investing

    How Rising Wages Will Fire Up U.S. Stocks

    The September 2017 jobs report showed a 3% spike in wages, which is good news for the stock market.
  3. Personal Finance

    Why Low-End Jobs Are Paying More

    More companies are now paying employees in low-end jobs higher wages. Here is why – and who benefits.
  4. Personal Finance

    Minimum Wage: Good Cause Or Economic Pariah?

    Here are some positives and negatives to help you decide where you stand on the minimum wage debate.
  5. Investing

    Why Walmart Raised Its Minimum Wage

    Read about the potential pros and cons of Walmart's promise to increase its minimum starting salary to $10 an hour.
  6. Insights

    Wal-Mart's Wage Increase Has Potential Drawbacks for Workers (WMT)

    Wal-Mart workers were overjoyed to hear that they would receive $10 an hour. However, there are significant non-financial drawbacks to this raise.
  7. Insights

    Opinion: Trump's Lament That He 'Inherited a Mess' of an Economy? False! Sad!

    So much for The Donald’s ‘Crippled America,’ as new numbers show incomes soaring under Obama.
  8. Investing

    What the Recent Minimum Wage Debate Means for McDonald’s Stock Price (MCD)

    Find out what effect a minimum wage increase will have on McDonald's stock price. Examine the results of the increase in McDonald's minimum wage.
  9. Personal Finance

    10 Jobs with the Biggest Raises This Year

    Some jobs offer a bigger pay increase than others for 2017. Whether your job's included and where to look.
  10. Insights

    Minimum Wage Increase: Will Technology Help Margins for U.S. Companies? (MCD, MSFT)

    Discover why the $15 per hour minimum wage movement may unintentionally be sowing the seeds for a new crop of jobs-stealing robots.
  1. Does raising the minimum wage increase inflation?

    Explore whether raising the minimum wage increases inflation. This is a polarizing topic that is inherently linked to unemployment. Read Answer >>
  2. What are the differences between operating expenses and cost of goods sold (COGS)?

    Operating expenses and Cost of Goods Sold are both considered expense accounts. They measure different ways in which resources ... Read Answer >>
  3. What are the differences between operating expenses and SG&A?

    Learn what businesses mean when they list operating expenses or SG&A as line items on an income statement; understand how ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center