Understanding base salary

What is base salary?

Base salary is the fixed sum paid to an employee for their work, excluding bonuses, commissions, benefits, stock options, or other variable pay. Employers normally state it as an annual or monthly gross figure before taxes and deductions.

This fundamental element of compensation is specified in the employment contract and forms the basis for calculating pay rises, severance, retirement contributions, and other financial benchmarks.

How base salary works

Base salary is agreed before employment begins and generally remains unchanged unless renegotiated or adjusted during performance reviews, promotions, or market-driven salary updates. The main ways it operates are:

• Payment frequency (for example, monthly or biweekly) depends on local legislation and the employer’s pay policy.
  
  
• Payroll calculations start from the base salary before deductions are applied or additional earnings are added.
  
  
• Employee classification (for example, exempt versus non-exempt in the U.S.) affects how base salary is treated and whether overtime pay applies.
  
  

Typical drivers of base salary include job title, industry norms, geographic location, cost of living, and the employee’s experience.

Why companies use base salary

Base salary creates structure, predictability and fairness in pay. Employers rely on it to:

• Set the minimum guaranteed pay for a position.
  
  
• Provide the foundation for other compensation elements, such as bonuses or equity.
  
  
• Serve as a benchmark against internal salary bands and external market rates.
  
  
• Support pay transparency and consistency across teams and locations.
  
  

Practical examples of base salary

• A marketing manager receives a base salary of $80,000 per year, together with a 10% performance bonus and stock options.
  
  
• Two engineers in equivalent roles—one in Berlin and one in São Paulo—may have different base salaries in EUR, adjusted to local market levels and cost-of-living variations.
  
  
• A company updates its salary bands annually to keep base pay competitive in the global market.
  
  

Base salary, gross salary and total compensation

People often confuse base salary, gross salary and total compensation, but they denote different concepts:

• Base salary denotes the fixed pay, excluding any additional earnings.
  
  
• Gross salary comprises base salary plus bonuses, commissions and other earnings, before taxes.
  
  
• Total compensation covers gross salary together with benefits, stock options, allowances and other perks.
  
  

Knowing these differences is essential when setting compensation expectations and negotiating offers.

Considerations when assessing base salary

When setting or reviewing base salary, consider the following:

• Local market rates and sector benchmarks.
  
  
• Legal minimums (for example, minimum wage and salary thresholds relevant for visas or tax status).
  
  
• Currency fluctuations when recruiting across borders.
  
  
• Internal equity to avoid pay disparities and uphold fair compensation practices.
  
  

How Remote can help

Setting and managing base salaries across multiple countries is complex, particularly due to currency conversion, salary bands and compliance risks. Remote simplifies this process by:

• Providing localised salary benchmarks to help you make competitive and fair offers.
  
  
• Managing payroll, benefits and total compensation via a single platform.
  
  
• Ensuring compliance with local labour laws, including minimum salary rules and pay-transparency requirements.
  
  

Remote helps you manage global compensation correctly, from base salary through to total rewards. Visit Remote’s salary explorer to save time and reduce costs in compensation planning.