An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

Base Salary

What Is Base Salary?

Base salary is the amount of money a salaried employee regularly earns before any additions or deductions are applied to their earnings.

Employees will likely encounter their base salary as part of the initial job listing. When a person is offered a job, the formal offer letter will include the base salary. Then, when an employee is hired, the base salary will be included in the employment contract.

Additions and deductions to base salary can significantly affect the size of an employee’s paycheck. Here are some common adjustments:



How to Calculate Monthly Income

Salaried employees receive the same fractional amount of their annual base salary every payday. To calculate the amount:

How to Calculate Annual Income Biweekly

To calculate annual income on a biweekly basis, you need to divide your annual total by the number of biweekly pay periods in a year. A year has 52 weeks, and since biweekly payments occur every two weeks, there are 26 biweekly pay periods in a year.

Base Salary vs. Hourly Rate

Employees paid a base salary receive a fixed amount each pay period regardless of how many hours they work. In contrast, employees who receive hourly pay are compensated for the number of hours they work. Unlike most salaried workers, hourly workers are generally also entitled to overtime pay if they work more than 40 hours in a week.

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

Unlike base salary, gross earnings and net wages take into account additions and subtractions to an employee’s standard rate of pay:

Base Salary Example

Jamal is hired by a company that agrees to pay him a base salary of $48,000 ($4,000 per month). When Jamal receives his first monthly paycheck, he sees:

In this example, Jamal's gross earnings (e.g., pay before taxes) are $5,000. Once taxes are withheld, his take home pay (also called "net wages") is $3,950.

Can Base Salary Change?

Yes, base salary can change due to increases or reductions in pay.

Many jobs have a salary range, which consists of a minimum and maximum amount set by a company for a given position. This range is determined based on market rates for the work and the employee's experience and skills. Initially, a new hire with limited experience might receive the minimum amount within that range as their base salary. As the employee gains more experience and enhances their skills, they may receive raises, gradually progressing towards the maximum pay for their position.

While reductions in base salary are uncommon, they can occur during challenging economic times when a company needs to tighten its belt. Unless there is a formal employment contract specifying a particular salary, companies have the freedom to lower an employee's base salary. However, in the absence of a contract, employees also have the freedom to choose to leave the company rather than accepting a lower base salary.

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