Base Salary: What is It? (With Examples)

By Chris Kolmar - Nov. 4, 2020

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When looking at the total compensation offered for a job, one of the most important elements to understand is the base salary, also known as base pay.

Base Salary: What is It?

Base salary is the initial, fixed rate of monetary compensation paid to an employee in exchange for work performed. When you here an employer (or anyone) talking about salary, they are usually referring to base salary.

Typically, base salary is given to an employee with the expectation of a minimum of 40 hours of work a week. Base pay can be expressed as hourly, monthly, or yearly. For example, someone who earns a base salary of $25/hour can also be said to have a base monthly salary of $4,333/month or a base annual salary of $52,000/year.

Base salary does not take into account other forms of compensation. These include:

  • Tip income

  • Bonus pay

  • Sales commission

  • Overtime wages

  • Stock options

  • Recognition pay

  • Benefits (health insurance, paid time off, 401(K) matching plans, life insurance, etc.)

  • Non-cash benefits (meals, use of an on-site gym, use of company car, etc.)

In other words, base pay is the minimum monetary compensation, pre-tax, an employee receives for a specified pay period.

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Calculating and Comparing Your Base Salary

Base salary for a position can be determined using the following factors:

  • Market pay rates for employees performing similar roles in the same geographical area

  • The availability of people who can perform such work in the area

  • Base salary ranges that an employer establishes

  • Educational background/qualifications

One of the best resources for determining a fair base salary for a given position in a given geographical area is the Bureau of Labor Statistics (BLS). Here you can find a breakdown of the average salary and wages of workers by several factors, including:

  • Occupation

  • Job characteristics

  • Industry

  • Gender

  • Geographical area/cost of living (state, metro area, etc.)

  • Demographics

  • Education level

  • Experience level

  • Seasonality

  • Skillset

You can see information about both base pay and typical benefits offered on the BLS website.
Other resources, like the Society for Human Resource Management (SHRM) and websites like Payscale, offer other avenues for researching an appropriate base salary.

Difference Between Base Pay and Annual Pay

While base pay only accounts for the minimum monetary compensation you receive in exchange for work, annual pay involves a whole lot more. Remember all those goodies we excluded from base pay in the section above? Don’t worry about scrolling up, here they are again:

  • Tip income

  • Bonus pay

  • Sales commission

  • Overtime wages

  • Stock options

  • Recognition pay

  • Benefits (health insurance, paid time off, 401(K) matching plans, life insurance, etc.)

  • Non-cash benefits (meals, use of an on-site gym, use of company car, etc.)

Things like tip income, bonuses, commissions, overtime, stock options, recognition pay, and a 401(K) matching plan are easier to assign a dollar value to. But you may have to dig a little deeper to figure out the value of insurance premiums, paid time off, and other non-cash benefits, like the use of a company car.

Take all of those and add their total value to your base pay, and you’re left with your annual pay. It’s easy to see that annual pay can be significantly higher than base pay once you add these extra monetary and non-monetary perks into consideration.

Base Pay: Salaried vs. Hourly Employees

Base pay can be expressed hourly, monthly, or annually. If you are an hourly employee, then your base pay will be your hourly wage. There are pros and cons to being a salaried employee and an hourly employee.

Salaried Employee Pros

  • Consistent pay

  • More benefits

  • Paid time off/sick days

Salaried Employee Cons

  • Less autonomy over holidays/overtime

  • May work more than 40 hours/week

  • Less availability for supplementary income

Hourly Employee Pros

  • Overtime/holiday pay

  • More autonomy over schedule

  • More availability for supplementary income

Hourly Employee Cons

  • No compensation for time off/sick days

  • Fewer benefits

  • Less reliable/vulnerable to economic changes

As you can see, an hourly employee must keep track of his or her hours and may receive overtime when working more than 40 hours a week. This means that, while hourly base pay is consistent, an hourly employee cannot fully chart out their monthly or annual pay.

Salaried employees do not need to keep track of their hours worked and receive flat base pay, regardless of work completed. While that might sound like a plus, it can also mean that a salaried employee might work more than 40 hours in a given week without receiving extra compensation for it.

Understanding Your Compensation Package

Base pay is just one element of your compensation package. Your compensation package includes all those extra goodies we’ve already discussed, like health insurance, while base pay only accounts for your minimum monetary compensation.

Every situation and every employee is different. Depending on your situation, you may value certain benefits, such as having your family members covered by your health insurance, more highly than others. Or if you’re working as a sales representative, a large percentage of your total compensation may come from commissions.

While base salary is a very important component of your compensation package, and thus your decision to take a job or not, remember that it is not the sole component. Take the time to research what other elements of your compensation package are worth, both in the market and for your specific situation.

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Chris Kolmar

Author

Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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