Definition of Base Pay



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.

Definition of Base Pay - Financial DictionaryIn 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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