Rivermate | Product owner - Andrew Simon

Global Work Glossary

What is base salary?

Base salary is the foundational component of an employee's compensation package, representing the minimum amount of pay they will receive for their work before tax deductions and additional compensation.

Key Points:

Definition: Base salary is the minimum amount of pay an employee will receive for their work, typically determined on an annual basis but can also be provided on a weekly, bi-weekly, monthly, or daily basis. Total Compensation: While base salary is highlighted in a job offer, it is only one part of an employee's total compensation package, which includes additional earnings, benefits, paid time off, and other perks provided by the employer. Difference from Net Pay: Base salary is different from net pay or take-home pay, which is the amount an employee receives in their bank account after taxes and other deductions. Base Pay vs. Annual Pay: Base pay is the minimum an employee will earn in a year, while annual pay (or gross pay) considers all other factors such as overtime, bonuses, commissions, and benefits. Base Salary vs. Hourly Pay: Base salary is a fixed amount of compensation based on a fixed number of hours, typically for salaried employees, whereas hourly pay is the amount paid per hour worked, often for hourly employees who may be eligible for overtime pay.

Calculating Base Salary

Base salary can be calculated by subtracting bonuses, commissions, overtime, and other additional earnings from the total annual pay. Alternatively, for hourly employees, base pay can be calculated by multiplying the number of hours worked per week by the hourly wage and by the number of weeks in a year. Factors Affecting Base Salary: Base salary can vary significantly depending on factors such as location, industry, seniority, job title, cost of living, and required skill sets.

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