Salary and profit both terms represents the inflow of money; however, there is a sea of difference when it comes to earning money from salary and earning money from profits. In order to understand both terms better let’s look at differences between salary and profit –
- Salary refers to earning money by providing services to an organization hence employees give their services to the company for which they get salary as rewards for giving their services whereas profits refer to earning money by providing goods and services by the company to its customers. So, for example, WalMart earns profits by selling retail products to customers and WalMart employees earns salary by giving their services to the company or Citibank earns profits by providing services to its clients and Citibank employees earns salary by giving services to the clients of Citibank.
- Salary is earned by individual whereas profit can be earned by both individuals as well as companies. An individual can earn profits through sole proprietorship and partnership whereas companies can earn profits by forming public or private sector companies.
- Salary is earned on weekly, fortnightly and monthly basis moreover its date is also fixed so for example majority of people get their salary on the first week of the month if salary is payable monthly whereas profit is earned quarterly or on yearly basis so for example companies announces their results quarterly or annually and not monthly.
- Salary tends to follow arithmetic progression hence every year salary of an individual grows by 10 or 20 percent whereas profits tends to follow geometric progression so in first year profit of growing company will be 10 percent than in the second year it will be 20 percent then in 3rd year it will be 40 percent and in 4th year it will be 80 percent.
- Salary is constant and received by individuals on continuous basis, so for example if the salary of an individual is $5000 per month then he or she will receive that salary month whereas profits is not on continuous basis and the amount of profit also keep fluctuating so for example in one month company may incur losses and in another month company may earn extraordinary profits. In simple words in a case of salary inflow of money is stable while in the case of profits inflow of money is fluctuating.
- Salary keeps the individual secure because if an individual is working for government organization or big private companies then he or she is sure about his or her job and also about the salary however the salaried person will always remain as employee no matter what position he or she achieves while on the contrary profit is unpredictable and an individual can never be sure about it, however, he or she will always be boss and there is no one to tell what to do and what not to do. In short in case of own business one is master of himself and herself.
- Individual who earns a salary are called working class or salary class people while people who earn a profit are called business class people.
As one can see from the above that both salary and profit are different from each other when it comes to objectives and ways of earning the salary and profit as salary are for those people who want to play it safe while profit is for those people who want to take the risk.