Base Salary
Base salary is the salary paid to employees in return for the service and value they bring to businesses. It is considered the amount employees receive, excluding bonuses and other allowances.
What is a Base salary?
Base salary meaning indicates the salary employees receive in hand at a discussed time for the service they offer to the business. It can be on a daily, hourly, or monthly basis, as per the contract signed.
So what is Base salary? The Base salary is what employees take home and call their earnings for a given period. It does not include any additional commissions or bonuses for overtime or pitching a big project.
Depending on the Base pay scale, the Base salary of an employee may increase every year.
Different types of Base salary
Hourly wage
If the employee or workers are employed by the company on an hourly wage, they will get their Base pay for every hour they spend working at the job site. All workers who are paid hourly are considered hourly wages. This is common for workers employed in industries like hospitality and retail when they are hired on a temporary basis.
Annual salary
The salary that employees receive monthly or annually talks about the long-term commitment, which falls under the permanent contract between the employee and the employer.
Who receives the Base salary?
Employees employed in the company for the long term are most likely to receive a Base salary. Whereas, employees choosing individual contractors or freelancers might be paid as per the mutual discussed amount.
Base salary is discussed with the respective employees before being completely employed. Moreover, it can continue to fluctuate with inflation and promotions.
Base Salary Calculation Formula
Here is formula for Base salary calculation:
Base salary = Gross salary – Total allowances (Dearness allowance + medical allowances + conveyance + other allowances)
Here is one of the Base salary example: if an employee made an annual salary of Rs 8,00,000 before withholding Provident Fund and Gratuity, they would be paid Rs 8,00,000 – ₹35,000 (Total allowances). The Base salary is $7,65,000.
What factors influence the Base salary?
Several factors are considered when determining the Base salary in India. The following are some of the key factors:
- HR Policies: Human resource policies can greatly influence an organization's Base salary structure. These policies may result in a skilled employee earning more than a comparable colleague.
- Company Policy: Salaries are generally set Based on factors such as market supply and demand, employee turnover, and product/service offerings. IT firms, for example, offer a different Base salary than small content writing firms.
- Designation: An employee's designation significantly impacts his or her Base salary. More experienced and qualified individuals will likely earn higher pay scales than those with fewer qualifications and experience.
- Location or Country: The economy and society in a particular location or country can also affect salaries. For example, the Base salary in India may be much higher than one in the USA because of the different living costs.
How Base Salary, Net Salary, and Gross Salary Differ:
These three terms play an important role in the lives of employees and employers. Here are clear cut details about the three key terms to distinguish salaries:
- Base Salary: Base salary is the net salary amount employees receive which was discussed earlier during the hiring process. Base salary does not include bonus, overtime and other benefits. It sets the foundation for other elements of salary.
- Gross Salary: Gross Salary does not involve taxes or other deductions and can add overtime pay and bonus payments.
- Net Salary: Net Salary is the amount left after all compulsory and voluntary amounts are deducted from gross pay.
Base salary is what employees tell when asked about their monthly salary. It is the fixed pay they receive regardless of whether they get the bonus. To calculate Base salary, multiply regular payments by the number of pay periods in a year.
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