Wage expense is a critical component for an employer to consider when deciding which type of employee to hire. Hourly employees can give employers an advantage in being able to hire or layoff staff when needed and are therefore generally favored for those jobs that cover peak times of the year or for jobs that require only limited skill or experience. Salaried employees are typically hired when an employer wants to hire a full-time employee and have stability and continuity in their workforce. Salaried jobs ensure that an employer is paying for a certain number of hours of work, even if that employee works more, as opposed to employing a person hourly and paying for every hour worked.

Wage expense is typically related to employee mileage, meals, uniforms, and travel expenses if they are required to travel as part of their job. The total amount spent on wages is the sum of the wages paid, payroll taxes, and employee benefits. Payroll taxes refer to local taxes that an employer pays on behalf of the employee, such as Social Security and Medicare, while employee benefits refer to any additional benefits provided by the employer to the employee, such as health insurance, life insurance, and retirement plans.

It is important for companies to keep track of their wage expenses so they can properly budget for payroll and ensure that their employees are properly compensated for their time and effort. In addition, tracking wage expense can provide a better understanding of the cost associated with running a business and understanding the return on investment for certain activities.