Your base pay is your regular hourly (or salaried) pay without any commissions, bonuses, or overtime pay. In other words, this is the basic amount of money that your pay will be if no bonuses are added or taxes taken out. It can be paid hourly or by an annual salary.
When you’re job hunting, one of the most important things to find out is how much money you can expect to bring home. After all, we may enjoy working, but you can’t take a job that doesn’t pay enough to pay your bills.
Job search results often mention high pay, especially if there’s tons of overtime to be made. However, that’s not a reliable indicator of what you need to make. Base pay, on the other hand, is. But, what is it? Before you say yes to a job, find out the base pay and gross pay you can expect. But, before you even do that, learn a little more about what a base salary is.
What is base pay?
Base pay is the basic pay that you will get before you have financial benefits, bonuses, or commissions added in. It’s not your total compensation unless you don’t receive an extra bonus. Many people agree that this is the most reliable way to figure out if a job is going to work with your budget.
Base pay can be accrued with a minimum hourly wage for the hours you work, or a minimum annual salary that you receive. Either way, it’s the bare bones that an employee receives after they do the work.
Is your base pay the same thing as your annual income?
It can be if you have no overtime pay, bonuses, or commissions. However, most companies will offer a compensation package that involves an employee’s base pay, tips, commissions, or stock options.
Your gross annual income is the total actual amount of money you earned over the year, as well as the money the company paid into your benefits. So, if your compensation package included employer-paid health insurance or a gym membership, that would be included in your annual income.
Can you get overtime pay if you have a base pay?
The Federal Fair Labor Standards Act states that employees, unless exempt, must receive overtime pay if they work more than 40 hours per week, whether you’re an hourly or salaried employee. A worker may also be entitled to sue their employer if they are not paid overtime pay for working extra hours.
However, salaried employees are usually considered exempt and aren’t eligible to receive overtime pay if they work extra hours. Most often, hourly employees are the only workers that receive overtime pay.
Base pay vs. gross pay vs. net income
If you are still trying to figure out how much you should expect to take home, or just want to understand what each pay type means, we have a quick guide.
- Base pay is the minimum wage or minimum salary range you should expect for working an allotted amount of time. This means that employees will get this amount regardless of their job performance.
- Gross pay is the distributed amount of money paid to employees during a specific period of time, such as a biweekly pay cycle, without any deductions taken out. This can include your base pay, plus commissions, bonuses, overtime pay, and any other additional compensation that your specific job gives you.
- Net income is your gross pay minus taxes and other deductions that you have taken out. Your net income is what you keep after funds have been deducted for benefits, health insurance, and taxes. Your net income is often going to be the lowest number of the three.
How companies determine base salaries
How companies determine the amount of base pay they can afford to offer employees is very complicated. It usually involves budgeting, comparing employees’ salaries with similar skill sets and education, and levels of employee responsibilities.
As a way to attract better talent, most companies are amenable to adding company-sponsored benefits as part of a more complete compensation package. If the benefits package includes a lot of extras like 401(k) matching funds and high commissions, it is common for them to offer lower base salaries.
Why do some jobs have a low base pay?
This can vary from company to company, but it often depends on the job title you get, as well as how many resources they have to share. Some companies are frugal, while others simply let additional benefits compensation make up for a lower base salary.
Specific sales positions often have a low base pay, as a way to give people a minimum wage when they make their first sales. The idea is that commissions and bonuses will make it possible for the employee to earn a living wage.
Is a base hourly wage better than a base salary?
This all depends on how many hours you work for your employer. If you are expected to work overtime without overtime compensation, then a base salary is often what you’ll get. This tends to work in favor of the employer, not the employees.
Because there are a lot of considerations, it’s best to do the math to find out which option is the higher base pay for you. Generally speaking, salaried employees are expected to work a minimum of 35 to 40 hours per week.
How is base pay calculated?
If you are a salaried employee, then your base pay is solely your annual salary without additional compensation. If you get an hourly rate, then your base pay is calculated as your hourly rate multiplied by the number of hours worked.
What is an example of base salary?
A base salary example would be as follows: A company is hiring a new sales employee. They pay the employee $500 per sale, but they know that the new hire is going to need a minimum salary in order to offset rough weeks and months.
The company decides to pay employees $300 per week as a base salary for full-time employees, regardless of whether they make sales.
Is base pay the same as gross pay?
No, base pay doesn’t include overtime and other compensation. Meanwhile, gross pay will take all the other forms of monetary compensation into account. These numbers can be vastly different. You may be shocked to find out how much of your salary is really yours.
Is base pay gross or net?
Base pay isn’t gross pay or net pay. It’s a completely different term that defines the bare minimum wage you will earn prior to taxes and other deductions. Base pay also doesn’t take other benefits like HSAs into account.
What is basic military pay?
Basic military pay, also known as basic pay, is the standard compensation earned by military members. It’s calculated based on cost-of-living increases, the individual’s rank, and years of service they have completed.
- Base salary is the minimum wage you will earn, without including additional compensation like bonuses or other benefits a company may offer.
- Your annual pay is how much money you earn through the year, including your base salary, bonuses, commissions, as well as any other incentives that you receive.
- Military members all get base pay calculated by the person’s rank and time spent in the service.
- Gross pay is how much you make in total, including any additional bonuses or incentives. Net income is the total money you take home after all taxes and other deductions are removed from your paycheck.
- When in doubt, ask your employer how the company pays employees.
- Check out your potential employer’s total compensation packages before you make a decision to accept a position with them and end your job hunt.
View Article Sources
- SEC Compensation Program — U.S. Securities and Exchange Commission
- Basic Pay — U.S. Department of Defense
- Top 20 High Paying Jobs in America — SuperMoney
- How Much Do Veterinarians Make? — SuperMoney
- Salary Series: How much of your salary is really yours? — SuperMoney
- How Much Do Dentists Make? Average Salary by State — SuperMoney
- What Is The Average Tax Attorney Salary? — SuperMoney
- What is Gross Monthly Income? (and 4 Ways to Calculate It) — SuperMoney
- How to Calculate Your Adjusted Gross Income — SuperMoney
- Gross Profit vs. Net Income — SuperMoney