Glossary of Human Resources Management and Employee Benefit Terms
Base wage rate is the minimum amount an employee may be paid for their work and is agreed upon during the hiring process, as related to the employee’s pay rate and schedule (hourly wage or a weekly, monthly, or annual salary). It is the amount of income an employee receives before benefits, bonuses, taxes, deductions, and other modifications.
Base wage does not include:
Special assignment pay
Employer-paid insurance premiums
The base wage rate varies significantly between industries and professions, but it may not be lower than the federal or state minimum wage rate.
Base wage is based on:
Cost of living inflation
Level of experience
Therefore, if the cost of living goes up, an employee moves to another state, or an employee receives a promotion/demotion, their base wage rate will change. Otherwise, it does not.
Base pay is another way to say base wage rate, but it has the same meaning. However, base pay is not the same as gross pay.
gross pay = base pay + additional compensation
Additional compensation can be bonuses, overtime pay, and other incentives.
Base salary and gross salary have the same differences as base pay and gross pay. That is, base salary does not include additional compensation such as overtime pay, but gross salary does. The base salary and gross salary may be the same amount if there is no additional compensation to take into account.
A salaried employee is paid to get work done, regardless of the hours required to do it. This means they may work less or more than a standard 40-hour work week, but get paid a consistent base (and gross) salary regardless.
Base salary (or basic salary) and annual salary may be the same, but only if an employee earns no bonuses, overtime pay, employer-paid insurance premiums, etc. However, when taking into account any earned additional compensation, an employee’s annual salary can end up being significantly higher than their base salary.
Yes, base salary is an employee’s pay before taxes (income, Social Security, and Medicare) are withheld.
Base pay is not really calculated, but determined and agreed upon during the hiring of an employee. An employer sets a base pay rate, often in the form of a salary range, and the employee either agrees to this base pay or they negotiate a different one.
Legally, the minimum amount that can be paid to a worker is the set federal ($7.25 per hour as of 2020) or state-specific minimum wage requirement. Types of jobs that are most likely to pay this minimum wage rate are in the janitorial, delivery, retail, and restaurant industries.
The salary range is the minimum and maximum amount of pay an employee can be paid for fulfilling their job role. The range varies depending on factors such as cost of living in a certain geographic location and official job title. The specific base pay within the range will also vary, depending on the employee’s work experience or time working for the company.
Here is an example of base pay and how it is determined:
Jimmy lives in Chicago and has just been hired full time (40 hours per week) at a start-up tech firm. As an entry-level tech support specialist, his employer will pay him $18 per hour. Jimmy’s base pay for a two-week pay period is:
$18 per hour x 80 hours = $1,440
Here’s one more example:
Nadia works in San Francisco at the corporate headquarters of a retail brand. She was earning a base wage rate of $58,500 per year as an HR rep, but has just been given a promotion and pay increase. She now earns a base wage rate of $74,000 as an HR supervisor.
Remember, the base pay does not take into account any additional compensation. It also doesn’t account for taxes withheld or deductions because base pay is the amount these items are based upon.