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Wage Drift

Meaning & Definition

Wage drift refers to a difference between the salary negotiated by a company and the one that is actually paid to an employee by the end of the work period, be it monthly or weekly. Wage drift usually occurs when a company has the un-predicted demand and needs its workers to put in extra work hours. The workers, naturally, receive overtime compensation for this and accumulate a difference over their based negotiated salary over a period of time. This phenomenon mostly occurs in areas or industries where demand is highly unpredictable on a short-term basis, like tourism or high-growth economies.

In other words, wage drift is a term used to describe a situation where an employee’s actual wage or salary exceeds the agreed-upon or contractual wage. It often occurs when employees receive pay increases that are not formally documented or when they earn extra income through bonuses, overtime, or other forms of compensation.

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