Understanding your base salary
When looking for a job, it's important to know what your minimum base salary is. This way, you can have better negotiating strategies ready when it's time to talk compensation. When determining this number, you need to consider other factors, such as the benefits the employer offers. Here we discuss what a base salary is and how it differs from other forms of compensation.What is a base salary?
A base salary, also known as base pay, is the amount of money an employer pays you to do your job. Your employer may offer you a payment based on an hourly rate or a weekly, monthly, or annual salary. Your base salary only includes the flat, unchanging rate you are paid in exchange for your work. It does not include the following components:
- Health insurance
- Life insurance
- Paid time off
- Stock options
- Retirement plans
- Bonuses
- Commissions
How does a base salary work?
An employer will determine your base salary based on their budget and the market’s demand. Likewise, they will take your qualifications and background into consideration as well. When you receive a job offer, you have some leverage to negotiate your flat rate of pay, especially if you have outstanding qualifications.
When an employer offers you $50,000 annually, it is unheard of to receive that money in a lump sum payment. Instead, most employers will break it up into biweekly payments. When you agree to your salary, an employer typically expects you to work around 40 hours a week. As a salaried employee, it is unlikely that you receive any sort of overtime for working additional hours.
Why is a base salary important?
A base salary is an important part of determining your personal budget and if a job can provide enough money for your lifestyle. Some people are willing to accept a lower salary if they will also receive excellent benefits. Since things like health insurance can cost a lot each month, you could equate the amount you’re saving to additional compensation.
With the actual money you make, you can spend it as you wish. This is another important part of budgeting. Although insurance, retirement funds, and stock options have a dollar value, none of these forms of payment are yours to spend. That’s why it’s so important to know how much actual money you need each paycheck.
Those who rely on tips or commission also need to be aware of what they would make without these incentives. Depending on your occupation, you may not want to rely on getting this additional money. Rather, you can better budget off the money you are guaranteed.
The difference between base pay, gross pay, and compensation
Base pay is the amount of money you make to perform a task without considering any additional incentives, benefits, or perks. Let’s look at two similar terms and how they differ from a base salary:
Gross pay
When looking at your taxes at the end of the year, you’ll look at your gross pay rather than your base pay. Your gross pay includes your base pay plus any additional money you earned from your employer. This includes tips, bonuses, and commission. You are responsible for paying taxes on all of your wages received. One thing to keep in mind is that any reimbursements you receive are not taxed. Common reimbursement expenses include gas, lodging, meals, and other travel accommodations on business trips.
Compensation
Compensation are all the things you receive as an employee. For an hourly job, this usually just includes your base pay and any tips or bonuses you earned. As a salaried employee, you tend to receive a variety of benefits and perks that make up your compensation package. All of the following components are considered compensation:
- Base pay
- Bonuses, tips, commission
- Health care
- Pension
- Stock options
- Retirement plans
- Paid time off
How to talk about base salary in an interview
Follow these steps when discussing your base salary in an interview:
1. Know your value
Before your interview, do some research to find out what a fair salary for someone in your position would be. Use tools like Glassdoor’s salary search to learn the market average for the job title you’re applying to. When deciding what your ideal base pay is, consider your background and experience. If you are more than qualified for a role, feel free to use this as leverage to get a higher salary.
Learn more: Salary Negotiation Scripts For Any Job
2. Determine a range
After choosing your ideal number, come up with the absolute lowest salary you can accept. This way, you know when to walk away from a negotiation later on. Consider your flexibility on other forms of compensation. For example, an employer may be more willing to boost your paid time off than offer you a higher base salary. What’s important is that you feel like you’re getting a fair offer. If awesome health benefits are enough of a trade-off for a low salary, that may be an offer you want to accept.
Learn more: What to Do If You Get Asked About Your Current Salary During a Job Interview
3. Let them bring it up
The general etiquette is to let the employer bring up your salary first. By rushing into money talk, you may make the wrong impression. Once the employer asks you about your ideal salary, then it is fair game to have this discussion. Sometimes knowing your ideal salary takes some time. It is perfectly acceptable to say, I would like to think the information I learned today over and then discuss compensation. A good employer will be understanding of you needing time to figure out a fair payment.
If you do have a number in mind, share it. The employer will likely use it as part of their decision-making process. The time to negotiate your salary is when you receive a formal job offer, not during your interview.