Definition of Base Pay
By Dave Manuel
What does the term “base pay” mean? What is meant by the term “base pay”?
Base pay refers to the lowest amount of money that a person can receive under an employment agreement.
For instance - Joe Smith gets hired on to sell cars at a local car lot. The owner agrees to pay Joe Smith a base salary of $12,000 per year, provided that he works at least 40 hours a week. Joe will also make a commission off of every sale.
In this case, Joe’s base pay would be $12,000 per year. Provided that he lives up to his end of the employment deal (that is, working 40 hours per week), he will make a minimum of $12,000 per year in salary.
Another example - Larry Smith gets hired to work at a Wall Street brokerage firm. Per the terms of Larry’s employment contract, he will receive a base salary of $60,000 a salary, plus performance bonuses and a year-end bonus. In this case, Larry’s base pay is $60,000, but he could stand to earn substantially more from his bonuses.
One last example - a UFC fighter signs a 4 fight deal in which he will be paid $16,000 per fight, plus a $16,000 win bonus. In this case, the fighter’s base pay is $16,000, but he also stands to earn a win bonus plus other potential bonuses.
Note: Overtime is not included in “base pay”.
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