What is base salary?

Compensation is critical in shaping how organizations attract, motivate, and retain talent. It’s more than just a paycheck—it reflects your company’s values, competitive positioning, and commitment to its people. A strong compensation strategy helps build trust with current team members while drawing in prospective hires who align with your mission and goals.

At the core of any effective compensation plan lies the base salary. It’s the benchmark for raises, bonuses, and commissions, offering a clear structure that evolves with performance and market trends.

In this article, we’ll break down everything about base salaries—from how they differ from other forms of pay to their role within a broader compensation package. 

What is base salary? 

Base salary is the fixed, regular pay someone earns for their work. Unlike other types of compensation, like bonuses or overtime pay, base salary is predictable and constant, regardless of fluctuations in work hours or performance. It can be expressed as a weekly, monthly, or annual salary.

Base salary depends on someone’s locality, job role, industry, qualifications, and internal company policies. It’s a pre-tax amount that serves as the foundation for bonuses and raises, which are usually a percentage of the base salary.

Base salary vs. base pay

While base salary and base pay are often used interchangeably, they have distinct meanings.

• Base salary refers to the fixed amount earned by salaried team members, divided into regular payroll cycles. It’s predictable and does not fluctuate based on hours worked.
• Base pay, on the other hand, is a broader term. It includes both base salaries and hourly wages. For salaried professionals, base pay is their consistent salary. For hourly team members, base pay refers to their hourly rate.

Both terms describe foundational earnings, excluding additional compensation like bonuses, commissions, or overtime.

Does base salary include taxes?

Base salary is the gross amount someone earns before deductions and withholdings like federal and state taxes, Social Security in the United States or National Insurance in the United Kingdom, and Medicare. 

The amount people receive after these deductions is net income or take-home pay. Separating base salary from deductions gives you a consistent earnings figure, while taxes and other obligations vary based on individual circumstances.

What’s the difference between base salary, gross pay, and net pay?

Understanding the differences between base salary, gross pay, and net pay can help HR teams communicate pay expectations and provide a holistic view of compensation.

• Base salary is the guaranteed annual amount someone earns and a stable benchmark for compensation. It spreads evenly across regular paychecks. Base salary excludes any extra earnings or deductions and serves as the foundation of someone’s pay.
• Gross pay, or gross income, is the base salary plus variable add-ons, like commissions and end-of-year bonuses. It’s a team member’s full earning potential before any tax or Social Security deductions, capturing both the guaranteed salary and any additional earnings.
• Net pay, or take-home pay, is the actual amount deposited in a colleague’s account and reflects their spending power each pay period.

How base salary fits into compensation packages

A compensation package is the complete set of rewards an organization offers to attract and retain talent—and base salary is just one part of it. 

While base salary is the most recognizable element of compensation packages, they can also include benefits and perks like bonuses, stock options, health insurance, retirement contributions, paid time off (PTO), and access to wellness programs. While the base salary establishes consistent earnings, performance-based bonuses or equity incentives add extra earning potential and reflect the organization’s additional investment in each team member’s success.

How to determine base salary 

A person’s base salary depends on a variety of factors, including: 

• Job duties and responsibilities: The complexity and scope of a role-play a significant part in setting base salary. Roles with more responsibility that require specialized skills usually get higher base pay.
• Hours worked per week: Salaried roles often assume a standard full-time schedule (usually 40 hours per week).
• Experience and certifications: Candidates with more experience or additional certifications can bring added value to an organization, often warranting a higher base salary. 
• Market value: Employers benchmark salaries by researching industry standards and regional market data to offer competitive pay rates. Salary surveys and compensation analysis can help HR professionals set a base pay that aligns with the market.
• Individual requests: If an unmissable talent asks for a higher base pay than you’d planned for, you might have to redirect some funds. 
• Other benefits and perks: Base salary isn’t everything. It’s common for sales teams to offer low base salaries alongside high commissions, and even advertise on-target earnings (OTE) in place of a base salary. 

How to calculate paychecks from base pay 

For salaried roles, base pay is an annual figure you divide by the number of pay periods. 

Base salary per pay period = Annual base salary​ / Number of pay periods in a year

Sam’s annual base salary is $60,000. He has 24 pay periods per year. 

Base salary per pay period = $60,000/24 

In this case, Sam’s base salary per pay period is $2,500. 

Create great compensation packages for your people with base pay 

A well-crafted compensation package is a great strategy for attracting top talent and promoting loyalty and satisfaction among team members. Competitive base pay, paired with health benefits, retirement contributions, performance bonuses, flexible work arrangements, and fair pay transparency can make a lasting impact on engagement and retention. 

By setting a strong foundation with base pay, you can foster trust, align your team with company goals, and create an environment where talent thrives. When compensation is both competitive and equitable, it drives long-term success for your people and your organization.

Base salary FAQs

How do you determine base salary?

To determine base salary, HR teams consider factors such as job responsibilities, market rates, experience and qualifications, and the company’s budget and pay structure, to stay competitive and in line with organizational capabilities.

How is base salary different from total compensation?

While base salary is the fixed annual amount someone earns, total compensation encompasses all aspects of someone’s earnings. This includes base salary plus bonuses, overtime, benefits (such as health insurance and retirement contributions), stock options, and other incentives.

Base salary is the predictable, steady portion of income, while total compensation captures the full value of working at the organization. 

Can base salary change over time?

Yes, base salary can change over time. In fact, periodic salary adjustments are common and often align with performance, tenure, or shifts in job responsibilities. Base salary increases may also occur due to cost-of-living adjustments or promotions to keep compensation fair and competitive.

Changes in market rates or organizational compensation strategies may also prompt salary reviews. For HR leaders, regular evaluations of base salary help retain talent, boost morale, and maintain equity across roles.

How do you determine adjusted base pay?

Adjusted base pay refers to a base salary you’ve modified by adding variable elements like bonuses, benefits, or overtime. To find someone’s adjusted base pay, take the base salary as the consistent, guaranteed amount, and add bonuses and benefits. 

Is base salary negotiable during the hiring process?

Absolutely. Base salary is often negotiable during the hiring process. Candidates and employers usually discuss salary expectations to reach an agreement that reflects the role’s responsibilities and the candidate’s experience. Transparent negotiations also set the stage for a positive working relationship built on mutual respect and fair compensation.

What’s the difference between gross income and net income?

Gross income is the total amount people earn before deductions. You can determine net income by subtracting taxes, retirement contributions, health insurance, and other withholdings. Net income is the most accurate representation of someone’s spending power.