Salary or fee?

Salary and fee words can get confused and the word fee is used in a variety of ways. Salary is paid for work done in an employment relationship. Remuneration can be based on time (hourly wage or monthly salary) or work performance and the outcome. Fees, such as writing or lecture fees, can be paid both in employment and as an entrepreneur. If the recipient of the fee is employed, then the fee, despite its name, is salary.

When agreeing on work, attention must be paid to how compensation for the work done is proposed to be paid. From the employee’s point of view, this is relevant because pensions and the employer’s social security contribution must be paid from the salary, not from compensation for work.

Work can also can be paid for in fees, such as writer’s fee, meeting fee or lecture fee. The word fee is used variedly both in employment and as an entrepreneur and its significance has not been established. Fees can also be paid to those in employment, but in that case, despite their title, they are considered wages, for which also the pension and other insurance contributions, in addition to taxes, must be paid. It is essential to pay attention to the conditions of work, if it is an employment relationship or not.

The compensation paid for work can also be non-wage compensation. When agreeing on work, you should pay attention to how they propose to pay the compensation for the work done. From the employee’s perspective this matter is relevant, because you must pay pensions and the employer’s social security payment from wages but not from non-wage compensation.

From the taxation point of view, pay and non-wage compensation are treated differently, too. Non-wage compensation is not taxed as wages but as operating or professional income or as personal earnings. Non-wage compensation is therefore usually paid for work performed as an entrepreneur. Entrepreneurs pay e.g. taxes and pensions from the compensation they get and also consider other work expenses in the amount of the compensation.

The compensation for work can also be compensation for the use. Compensation for the use (royalty) refers to the compensation paid for copyright or its utilisation. Compensation for the use is paid for work in the creative industry and it is a compensation paid for utilising a piece of work under copyright. It is not intended to compensate for the wages payable for performed work.