What is a Base Wage Rate?
The base wage rate is the minimum amount that an employee may be paid for their work, and it is agreed upon during the hiring process in relation to the employee's pay rate and schedule (hourly wage or a weekly, monthly, or annual salary). It is the amount of money an employee earns before benefits, bonuses, taxes, deductions, and other adjustments.
Base Wage Rate is alternatively known as Base Pay or Base Salary.
The following are not included in the base wage:
- Bonus compensation
- Overtime compensation
- Pay for shift-difference
- On-call pay
- Pay for special assignments
- Pay based on performance
- Employer-paid insurance premiums
The base wage rate varies greatly across industries and professions, but it cannot be less than the federal or state minimum wage rate.
The base wage rate is determined by:
- Inflationary cost of living
- Geographical location
- Job position/title
- Experience level
As a result, if the cost of living rises, an employee relocates to a different state, or an employee is promoted/demoted, their base wage rate will change. Otherwise, it does not.
Base Pay vs. Gross Pay
Base pay does not include additional compensation such as overtime pay, gross pay does. If there is no additional compensation to consider, the base salary and gross salary may be the same amount.
A salaried employee is compensated for completing work, regardless of the number of hours required to complete it. This means they can work fewer or more hours than a standard 40-hour work week while still receiving a consistent base (and gross) pay.
How is Base Wage Rate calculated?
Base pay is determined and agreed upon during the hiring process, rather than being calculated. An employer establishes a base pay rate, usually in the form of a salary range, and the employee either accepts it or negotiates a different one.
The federal or state-specific minimum wage requirement is the legal minimum wage that can be paid to a worker. The janitorial, delivery, retail, and restaurant industries are the most likely to pay this minimum wage rate.
The salary range denotes the minimum and maximum amount of pay that an employee can receive for performing their job duties. The range varies according to factors such as the cost of living in a specific geographic location and the official job title. The specific base pay within the range will also vary based on the employee's work experience or length of service with the company.