What is Base Salary? (With Examples)

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.

Key Takeaways:

• Base salary is the fixed compensation you receive before benefits such as bonuses, commission, and stock options.

• Knowing your base salary is important for making smart financial decisions.

• Base salary can vary due to your experience, geographic location, and the demand of your position.

• Annual pay is your base pay along with all additional income.

• Do your research before you negotiate your base salary.

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 hear 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.)

All of the above items, plus your base pay, would be included in your total compensation.

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

Gross pay is what the government looks at when you pay your taxes. This includes things like bonuses, tips, and any other money you receive through your employment, excluding reimbursements.

Why Is Base Salary Important?

Knowing your base salary is essential for personal budgeting and whether or not a job opportunity is capable of supporting your lifestyle. Of course, if certain expenses will also be offset through a job (like health insurance, transportation costs, etc.), then calculating the value of those perks is equally important.

While a retirement plan, insurance, and other benefits have real monetary value, they are not cash in your bank account. You cannot spend that money freely, so it’s unwise to account for these items when determining what you can afford.

Additionally, those in sales or other tipped industries need to know what their minimum income will be, regardless of commissions or tips from customers. People in these roles need to be careful not to overestimate tip or commission income and understand that their base salary is the only real guaranteed income.

Of course, once you’ve spent time in a job, you can estimate how much you’ll earn through these channels, but it’s always best to expect a lower number and be happily surprised than vice versa.

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.

Other resources for determining a fair base salary for yourself include:

• Zippia. We provide salary data for every job title you can think of, with options to adjust your location, industry, and education level. We also provide a spread from the bottom 10% to the top 10% of earners to give you an idea of where your salary should fall, relative to your years of experience in the field.

  Zippia also has a fun interactive tool that helps you to see where your salary falls based on the metrics of gender, age, and education level.

• PayScale. PayScale offers salary data based on job title, experience and education level. It also provides a cost-of-living calculator that can help you compare salaries accurately across diverse geographical locations. After all, a high base salary in the Midwest might be a barely livable wage in San Francisco.

• Salary.com. Salary.com provides a useful benefits calculator that can help you determine the value of your total compensation package. This is especially useful for jobs where your base salary only tells a small part of the story. For instance, those with several dependents on their health plan, or a salesperson who can expect a steady income from commissions.

• LinkedIn Salary. The top professional networking site in the world naturally has a lot of salary data on hand. LinkedIn’s salary calculator gives you a median salary for jobs in the U.S. and breaks it down by region, experience level, and industry. It also provides useful data on common perks and benefits.

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?

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 (usually biweekly)

• 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.

How to Negotiate Your Base Salary

Negotiating your base salary when starting a new job is one of the most important things you can do. All of your future raises will be determined based on this starting number — the higher you start, the higher you end up later in your career.

Of course, if you feel an offer is genuinely generous, there’s no need to negotiate just for the sake of it. But if you do opt to negotiate your salary, keep these tips in mind:

• Do your research. Use any and all of the resources we listed above for finding salary data. Knowing your market value is a real asset at the negotiation table because it’s an objective, research-based number, rather than a flight of fancy you dreamt up.

• Let the employer bring it up. It’s good etiquette to allow the hiring manager to bring up salary first. Those who rush into money talk may be seen as ambitious for the wrong reasons and more interested in personal gain than helping the company achieve its goals (which, of course, most people are, but we all have to play along).

• Give a range. You don’t have to respond to this question with an actual number, but if you do, we recommend giving a range. The bottom of your range should be slightly above the actual lowest number you’d accept.

• Ask questions. If you’re given an offer, make sure you understand all of the elements of your compensation package. Make sure you’re 100% clear on all the fine print. Otherwise, it will be difficult to make an informed decision on whether the base salary is fair and/or acceptable.

• Be prepared to share your salary history. To be clear, you never need to tell an employer your salary history, but you should have it clear in your mind. If you do decide to provide details, always give the highest salary you received in each position, and be sure to include other monetary elements that we’ve said don’t count as base salary.

  For example, if you’re a salesperson, you could say something like “my base salary was $45,000, but I typically received between $6,000-$9,000 annually from commissions.” That way, you’re comparing apples to apples by taking a holistic view of your compensation.

Frequently Asked Questions

1. What is a base salary?

Base salary is the fixed compensation you receive before additional benefits and income. Base salary can be thought of as the minimum you can expect to earn for your labor. Base salary are set as an hourly rate, or as weekly, monthly, or annual income.

2. Is base salary the same as gross?

No, base salary is not the same as gross. Gross, or gross pay, is the sum of all compensation you receive at your employment except for reimbursements. Gross is the entire amount of income you receive.

3. How do you calculate base salary?

Calculate base salary by subtracting your benefits and additional compensations from your total salary. It is important to know your benefits and additional compensations ahead of time. You can also calculate your hourly wage and multiply it by the amount of hours worked.

Author

Matthew Zane

Matthew Zane is the lead editor of Zippia's How To Get A Job Guides. He is a teacher, writer, and world-traveler that wants to help people at every stage of the career life cycle. He completed his masters in American Literature from Trinity College Dublin and BA in English from the University of Connecticut.