The History of Compensation: Where Your Salary Came From

June 10, 2021

Workers expect to receive compensation for work. See where the salary came from and how it has evolved.

Image of a world map with different types of money (compensation) sprinkled around.

Do the Work, Get the Salary

Wake up.  Go to work.  Perform work.  Return home.  Go to sleep.  Repeat.  Receive compensation. 

Regardless of the type of work performed, the endgame is a worker performs a task and receives monetary compensation for it.

Has it always been this way, though?  Well, not exactly.  Let’s rewind to the beginning of time to see if we can trace history to the point when people began recognizing the value of work and thus receiving remuneration in return.

Revolutionizing the Salary

Photo of the silhouette of a person standing in a cave with a body of water in the background.

For starters, if you are looking for an old pay stub as evidence of the first time a laborer was compensated for work, you might as well give up your search.  That kind of record would have long disintegrated since it would be as many as 6,000-10,000 years old.  It is supposed the Neolithic Revolution birthed the first salary. 

Here’s a look at the evolution of the salary in the subsequent eras.

Neolithic / Agricultural Revolution

Why do historians think this might have been the starting point for compensation?  Well, it has to do with the establishment of a more advanced civilization, and the type of work that took place during that period.  The Neolithic Revolution is also known as the Agricultural Revolution.  At that point in history, smaller groups of nomadic hunter-gatherers began to settle into larger, more permanent communities.  It was then that farming became the standard.

So, how did people receive payment for work performed?  Well, considering the length of time passed and the limited records, we don’t know much.  The only thing we can speculate is that by that time, society was advanced enough to require work on a consistent basis.  Therefore, compensation would have been a necessity for the work performed.  Even so, the pay stub would look vastly different than the detailed line items on modern paystubs.

Salty Salary

Photo of a salt road with mountains and a blue sky in the background.

Now, as far as the role of the salary in compensation, there’s a story behind this, too.  Apparently, the word salary itself is derived from another type of industry that was commonplace during that time period.  We know Romans mined salt, but that is where the trail of breadcrumbs ends.  Aside from knowing “salis” is the Latin word for salt, it is unclear the exact derivation of the word.  Common theories include workers being paid in salt, receiving an allowance to buy salt, or that soldiers were paid to guard salt roads.  In fact, there is even speculation that the word “soldier” is linked to salt.

Related:  One Bite at a Time: Payroll Explained Through Hotdogs

Commercial Revolution

As exploration emboldened by powerhouse nations like Spain and England from the 1520s to the 1650s, the expansion from Europe into other parts of the world led to an uptick in commerce.  This time span is known as the Commercial Revolution.  It was also during this stretch that the money economy was born.  During this time, the non-monetary salary was more likely overshadowed by the hourly, daily, or per-unit wage.  This type of compensation reemerged during the Industrialization era of the 1700s and 1800s.

It was also during this time that some people were paid by way of shareholding.  Shareholders don’t actually receive a salary or a wage.  Instead, they take a draw against their share of the company’s earnings.

Salary via Sharecropping

Photo of a worker carrying buckets of water through a field and watering her crops.

Another way some workers received pay throughout history was by receiving a portion of what they produced working for a landowner.  This practice was called sharecropping.  During the post-Civil War Reconstruction era, sharecropping was commonplace.  Sharecroppers often rented land from landowners, instead of working for wages.  This enabled them to bypass some of the abusive management and discipline that carried over after the abolishment of slavery. 

2nd Industrial Revolution

From the 1870s to the 1930s, during the 2nd Industrial Revolution, payroll, as we know it today, began to take shape.  This was when the germination of large enterprises led to the classification of employee types from high-level executives, down to hourly wage employees.  Salaries were once again more common, as it was difficult to assess a per-piece value for office workers. 

In 1938, the Fair Labor Standards Act helped solidify the parameters for which employers should be paying their employees. 

Gig Work of the 21st Century

Photo of a driver behind the wheel of a car.

While it used to be that musicians were the most notorious gig-workers, that is a thing of the past.  If you know anyone who is a Lyft driver, a grocery delivery person, or a general freelance worker, you know a gig worker.  This is also called a flex worker. 

Related:  The Employer’s Guide to Fringe Benefits

Flex working gained popularity during the 21st century as people began to reject the idea that work had to take place at a worksite between the hours of 8 and 5.  Also, flex working allows people to make more or less money, depending on their current needs.

Salary Full Circle

In a way, payroll has come full circle.  Once upon a time, regular compensation through a salary wasn’t possible because of mobility.  Hunter-gathers were always on the move, and keeping reliable workers around wasn’t even an option.  Then, with the establishment of modern agricultural practices, sowing and reaping seasons required workers on a larger scale to be present with more regularity.  Greater access and consistency in food sources led to other types of businesses establishing nearby.  Eventually, all types of businesses needed to compensate employees and keep a record of remuneration.  Thus, modern-day payroll processes were born. 

Now, it is no longer necessary for workers to remain in one place in order to be paid for their work.  In fact, workers can stay near or go far—or even work remotely—and still receive compensation.  It’s crazy to think about, isn’t it?

So, the next time you get your paystub, perhaps you will see it in a new light.  After all, you could have spent all those hours on the computer and only have received a bag of salt for your hard work.

Photo of a hand holding salt (as salary).

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