Base pay is the minimum amount of compensation your employer agreed to pay you. According to the U.S. Department of Labor, you are paid on a salary basis if you receive a predetermined amount weekly or less frequently, such as biweekly. In terms of salary, this fixed amount is your base pay.
Base Pay Inclusions
Base pay can be hourly wages or salary. If you earn $12 per hour, that’s your base wages. If you earn weekly salary of $700, which is $36,400 annually, that’s your base salary. Depending on your performance or arrangement with your employer, your base pay may change. Suppose you earn $36,400 annually and receive a 5-percent annual performance increase. In this case, your new annual base salary is $38,220.
Base Salary Exclusions
Your base salary does not include any additional compensation or company benefits you receive from your employer. Extra compensation may include overtime pay, on-call pay and incentive-based earnings, such as bonuses and commissions. Though these extra payments can be part of your compensation package, they are not part of your base pay or salary. For example, as a sales representative, your compensation package includes the annual base salary of $25,000 plus commissions on each sale you close. The commissions are not part of the $25,000 base salary.
Employers generally set base pay or salaries according to what an employee brings to company. They create a payment range that shows the minimum and maximum compensation for the position in question. Then they match your experience, knowledge, abilities and skills with the job description to determine your compensation. When extending job offers, employers generally include the candidate’s base pay or salary in the offer letter.
Base salary usually applies to exempt employees, such as executive, professional and administrative workers. Under the Fair Labor Standards Act, salaried exempt employees do not have to be paid overtime if they work more than 40 hours per week. The FLSA also says that salaried exempt employees must receive no less than $455 per week. As an exempt employee, if your employer sticks to the minimum salary requirement, your base salary is $455 weekly.
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