What Is a Base Salary?
What Is a Base Salary?

What Is a Base Salary?

A base salary (also called a basic salary) is a standard salary that an employee receives for working for a company, institution or organisation. It is calculated without any additional bonuses or benefits that the employee could be entitled to.

This base salary or base pay signifies the remuneration an employee can expect for working their agreed hours without any other monetary additions.

Employees could be entitled to additional remuneration to supplement their base salary or base pay under certain circumstances.

What Benefits Are Additional?

Some benefits are paid in addition to the base salary. Therefore, an employee can annually earn significantly more than the base pay advertised.

These additional benefits include:

  • Health insurance (medical or dental)
  • Tips
  • Commission
  • Overtime (where applicable)
  • Bonuses
  • Expenses
  • Company phone/vehicle
  • Stock options

What Deductions Are Not Included in Base Salaries?

It is important to remember that base salaries can also incur certain deductions; therefore, a base salary does not accurately reflect a definite figure for take home pay.

Deductions that can be made from a base salary include the relevant amounts of:

  • Pension contributions
  • Taxes
  • Loan repayments (student loan, bank loan, etc.)
  • Contributions relating to company phone/vehicle use
  • Union subscriptions

What Jobs Usually Have a Base Salary

The majority of jobs that incur a base salary are for those where workers are exempt from federal laws regarding overtime compensation.

Workers whose hours exceed the standard amount set out in their base salary calculations will not receive additional remuneration for their overtime.

An attractive base salary is essential to entice appropriately skilled workers to these roles, which often include administrative workers, executives and IT professionals.

A competitive base salary also helps to maintain loyalty and continued employee service within the company.

Federally exempt workers must earn a minimum figure of $684 per week and satisfy other criteria outlined by the FLSA to denote their role as being exempt from overtime legislation.

How Does a Base Salary Work?

Base salary is usually calculated as a fixed amount based on a pre-determined number of hours worked and paid at regular intervals (weekly, bi-weekly or monthly).

A base salary will usually be calculated based on a 40-hour working week; however, this is not always the case.

Base Pay vs Base Salary

Base pay can be described as a fundamental amount an employee is entitled earn to per hour, whereas a salaried amount is usually a fixed amount calculated per week, month or year based on the total number of fixed working hours.

What Is the Difference Between a Base Salary and Annual Pay?

Base salary or base pay does not include additional payments an employee might expect to receive throughout a working year.

Annual pay, which reflects actual earnings over this period, may be significantly higher than base pay as it will reflect additional compensation, such as bonuses or benefits.

Annual pay also includes contributions made towards medical cover, dental cover or life insurance by an employer. These contributions are included with other benefits to the base pay and reflect an accurate figure of annual pay that an employee receives during a working year.

What Is a Base Salary?
What Is a Base Salary?

What Is the Difference Between Base Salary, Gross Pay and Net Pay?

Base salary is the fixed amount an employee can expect to receive from work; gross pay is equivalent to the base salary, including additional benefits (medical insurance, bonuses, etc.); net pay is the gross pay before deductions (tax, pension contributions, etc.).

  • Base salary – The fixed amount an employee receives
  • Gross pay – The fixed base salary amount, including benefits
  • Net pay – The gross pay before deductions

Therefore, an employee will begin with a base salary, receive additional benefits that make their gross salary, then incur deductions to formulate their net pay, which is essentially the amount they take home from work.

Negotiating a Base Salary

Base salaries vary widely; therefore, it is essential to understand the average base salary in relation to the profession and location before commencing base salary negotiations.

Additional remunerations (healthcare, insurance, etc.) should be considered, and all issues should be addressed early with potential employers, should clarification be required.

A competitive compensation package can be very attractive to a candidate considering a job offer that has a base salary.

Many jobs that incur a base salary are federally exempt from overtime law; therefore, employers may ensure that a competitive base salary is offered to attract highly skilled applicants.

When it comes to salary negotiations, knowledge is power. Therefore, potential employees should always conduct thorough research.

Finding Accurate Salary Information

Many companies conduct market research and provide resources for employers to help them accurately calculate the base salaries they offer.

For further information, sites such as Payscale can check if the base salary being offered for a particular job accurately reflects the current market rates.

The US Bureau of Labor Statistics regularly sources and collates useful information when considering base salary offers or negotiations with employers.

Final Thoughts

Before accepting a base salary, it is important to understand exactly what the figure being offered reflects and how realistic it is in terms of an employer’s expectations.

An individual’s personal circumstance, geographical location, cost of living, skills and experience could affect their decision on whether a base salary is ideal for them.

It is also important to consider the significance of any additional benefits that are on offer.

Employees should use the vast number of online resources available to them to research average base salaries, make calculations and negotiate.

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