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Definition
An employee's paid compensation, before incentive compensation is applied, is referred to as base salary. For newly hired employees, a base salary would not include features such as a sign on bonus or other monetary awards.
Explanation
An employee's base salary is the minimum annual money received, or the standard salary that an employee receives for doing a specific job. It is also used to calculate other allowances, such as incentive compensation and employee benefits. When an employee shares in the cost of benefits, such as life insurance or medical care premiums, these items are payable from the base salary.
Employees paid a base salary are usually considered "exempt" employees. That is to say, they are salaried employees. Exempt employees are not paid overtime, and in the same way their pay is not reduced if they occasionally leave work early. This is different than the treatment of hourly employees, which are considered "nonexempt".
Related Terms
- The term total compensation is used to describe all forms of monetary payments to an employee. For existing employees, this can include both base pay as well as incentives. For newly-hired employees, the total compensation in the year hired may also include a sign-on bonus.
Moneyzine EditorSeptember 26th, 2023 - The term incentive compensation refers to the portion of an employee's salary that is related to performance, and not a guaranteed payment. Incentive compensation is additional money, or other rewards of value such as stock options, that are supplementary to base salary.Moneyzine EditorSeptember 26th, 2023
- The term sales commission refers to an agreed-to sum of money that an employee receives after reaching a certain level of sales. Sales commissions are usually a percentage of sales, or they can be a flat dollar amount that is triggered when the employee reaches certain sales thresholds.Moneyzine EditorSeptember 26th, 2023
- The term compensatory time is used to describe the process of giving an employee time off from work in lieu of overtime pay. A company's guidelines for administering compensatory time can be quite complex, with rules that can vary by exempt, non-exempt employees, as well as full or part-time status. Also, due to the pandemic in 2020, many employees have the opportunity to work from home, and according to "BYOD Statistics" companies benefit from 240 extra hours of employee work hours per year because of working remotely.Moneyzine EditorSeptember 26th, 2023
- The term cost-of-living adjustment refers to a periodic change to a benefit based on an index thought to be a good measure of living expenses. Cost-of-living adjustments (COLA) normally refer to an increase in an individual's income stream, which can be Social Security or a salary provided by an employer.Moneyzine EditorSeptember 26th, 2023
- The term employee stock ownership plan refers to a company-sponsored benefit program that provides employees with an ownership interest in their company. Participating in an employee stock ownership plan is one of several ways employees can purchase shares of common stock in their companies.Moneyzine EditorSeptember 26th, 2023
- The term federal minimum wage refers to the lowest hourly rate an employer may pay a covered nonexempt employee. The current federal minimum wage was established in July 2009, and the rate of pay is $7.25 per hour.Moneyzine EditorSeptember 26th, 2023
- The term living wage refers to a rate of pay that allows an employee to maintain a standard of living which meets their basic needs. Since the cost of living varies by geography, what is considered a living wage is location dependent.Moneyzine EditorSeptember 26th, 2023
- The term merit increase refers to the growth in an employee's wages which is awarded based on an objective measure of their past performance. Merit increases are not based on time in position, as is usually the case with unionized employees.Moneyzine EditorSeptember 26th, 2023
- The term salary history refers to a document provided to potential employers that summarizes the earnings of a job candidate over time. Employers may ask a prospective employee to provide a salary history as part of the candidate screening process.Moneyzine EditorSeptember 26th, 2023
- The term salary range refers to a span of competitive compensation paid by employers for a particular job type. Salary ranges are normally stated in terms of grades or bands, which will include both the minimum and maximum compensation paid to employees.Moneyzine EditorSeptember 26th, 2023
- The term salary requirement refers to the total compensation an individual is willing to accept to work in a position. As part of the job candidate screening process, an employer may ask individuals to provide their salary requirements in their application for employment.Moneyzine EditorSeptember 26th, 2023
