Base salary is the min. amount that employees get paid for work done. They may receive other payments on top of the base salary, such as commissions & bonuses.
A compensation package includes a variety of components. A critical part of every package is the base salary. This is the guaranteed amount that an employee receives as pay for their services.
A base salary is the fixed amount of money an employee earns for their work. Usually, employers calculate this amount by month or year. In some cases, a base salary may also be expressed as an hourly rate.
The lowest amount of base salary should be equal to the minimum wage in a given jurisdiction. This varies from country to country. Of course, for more specialized roles, employers offer base salaries by market demand and supply, the employee’s qualifications and experience, the industry and job title, and many other factors.
The base salary is important for employees because they can understand their financial situation and ensure economic stability. Predictability offers security and the ability to budget financial commitments.
Of course, a base salary isn’t the entire compensation package. It makes up just one component since employees typically also receive other benefits, some mandatory and some optional. Mandatory benefits often include health insurance, retirement plans, and sometimes bonuses. Optional benefits may involve additional insurance coverage, company equity, and other incentives.
Several factors come into play when determining an employee's base salary.
Industry and Job Market
Even for the same job, salaries may differ by industry. There are several reasons for this. Some industries are more competitive, while others require more specialized skill sets for the same profiles. Also, job markets may fluctuate, especially across different countries and regions.
Experience and Skills
A person’s level of experience and specific skills play a key role in determining their base salary. Generally, employees with greater expertise and in-demand skills tend to command higher salaries.
Education and Qualifications
If a job requires specialized qualifications, it will usually pay a higher base salary. Advanced degrees or industry-specific certifications often give employees an important edge when negotiating for their compensation level.
Geographic Location
The cost of living and regional economic conditions can impact base salaries. Urban areas with a higher cost of living tend to offer higher salaries compared to rural or less expensive regions.
Company Size and Financial Health
The size and financial stability of an organization often influence the base salary structure. Larger companies with greater financial resources often have more competitive compensation packages, including benefits.
No matter where you decide to hire, Borderless can help you across the hiring journey. We consult on compensation, benefits, and compliance with local laws and regulations. We ensure that you properly manage and pay employees in over 170 countries worldwide.
Book a demo to find out how.
