our everyday life

What Does "Minimum Base Salary" Mean?

by Sam Ashe-Edmunds

A minimum base salary is a guarantee of payment by a business to an employee, often indicating that the employee has an opportunity to make additional money based on performance. If you see the term “minimum base salary,” this might mean the company is offering a higher salary to those with more qualifications, or that a part of your earning potential is based on commissions or bonuses.

Salary Range

In some instances, a minimum base salary means the low end of the salary range the company is offering for the advertised position. When a company offers a salary “dependent on experience,” this means it will offer the higher end of the range to candidates with more education, training or experience. They do this because they expect candidates with more skills and experience to produce more, or because these candidates will require less support. For example, a marketing candidate who can use design software reduces a company’s spending on graphic design.

“Base”

The word “base” often refers to the salary of the position, with some or most of the worker’s compensation coming from a bonus, commission or other benefits. For example, if a company provides housing and a company car, it might offer a lower base salary because the employee earns the financial benefits equal to housing and transportation expenses. A minimum base might also refer to the lowest amount a company can pay an employee based on her tenure if the company has a contract with a union or if it is a government agency. This might mean the company has different base salaries for different workers in the same department.

Commissions

A base salary often goes hand-in-hand with a commission-heavy job. While it might be relatively easy to earn commissions, based on the timing of sales and collections, sales reps might need some cash to pay short-term expenses. A minimum base salary helps covers those expenses. In some cases, an employee only earns commissions after he has sold a non-commissionable amount of business that pays for his base salary. If the employee must hit this number to keep the pre-paid amount, this is known as a draw against commissions. Companies that pay primarily on commission often advertise minimum base pay to let candidates know the position is not 100 percent commission-based.

Bonus

Some jobs pay performance bonuses, ensuring that employees don’t coast because they have an attractive, guaranteed salary. Unlike commissions, bonuses aren’t always guaranteed or tied to sales levels. For example, a company might base a bonus on client retention levels, staff performance, employee retention rates or cost containment.

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

Photo Credits

  • Comstock/Comstock/Getty Images