Base salary explained

What does base salary mean for employers and employees?

Base salary denotes the fixed sum an employee receives for their work, excluding bonuses, commissions, benefits, stock options, or other variable compensation. Employers typically state it as an annual or monthly gross amount before taxes and statutory deductions.

This core element of compensation is recorded in the employment contract and serves as the foundation for computing raises, severance, retirement contributions, and other financial benchmarks.

How base salary functions in practice

The base salary is agreed upon before employment commences and generally remains unchanged unless it is renegotiated or adjusted during performance reviews, promotions, or market-driven salary updates. Below are the ways it operates:

• The schedule for pay (for example, monthly or biweekly) is set by local laws and company policy.
  
  
• Payroll computations begin with the base salary as the starting point before applying deductions or adding any further earnings.
  
  
• Employee classification (for example, exempt vs. non-exempt in the U.S.) can affect how base salary is administered and whether overtime pay applies.
  
  

Base salary is commonly influenced by factors such as job title, prevailing industry standards, geographic location, cost of living, and the employee’s experience.

Why employers establish a base salary

A clear base salary provides structure, predictability, and fairness within compensation frameworks. Employers rely on it to:

• Clearly set the minimum guaranteed earnings associated with a position.
  
  
• Serve as the anchor for other compensation elements, including bonuses or equity.
  
  
• Provide a benchmark against internal salary bands and external market rates.
  
  
• Foster transparency and consistency in pay practices across teams and regions.
  
  

Illustrative examples of base salary in practice

• For example, a marketing manager may be offered a base salary of $80,000 per year, with an additional 10% performance bonus and stock options.
  
  
• Two engineers—one in Berlin and another in São Paulo—may hold equivalent roles yet receive different base salaries quoted in EUR, adjusted to reflect local market rates and cost-of-living differences.
  
  
• A company may revise its salary bands annually to ensure base pay remains competitive in the global marketplace.
  
  

Distinguishing base salary, gross salary, and total compensation

Although the terms base salary, gross salary, and total compensation are often used together, they refer to different concepts:

• Base salary is the fixed pay component, excluding any additional earnings.
  
  
• Gross salary comprises base salary plus bonuses, commissions, and other earnings before taxes are applied.
  
  
• Total compensation includes gross salary in addition to benefits, stock options, allowances, and other perks.
  
  

Recognizing these distinctions is essential when setting compensation expectations and negotiating job offers.

Key considerations when assessing base salary

When establishing or reviewing base salary, take into account the following:

• Prevailing local market rates and industry benchmarks.
  
  
• Legal minimums (for example, minimum wage and salary thresholds for visas or tax classification).
  
  
• Potential currency fluctuations when hiring across borders.
  
  
• Internal equity to avoid pay disparities and uphold fair compensation practices.
  
  

How Remote can assist your global compensation efforts

Determining and managing base salaries across multiple countries can be complex—particularly when handling currency conversion, salary bands, and compliance risks. Remote simplifies this process by:

• Providing localized salary benchmarks to help you make competitive and fair offers.
  
  
• Managing payroll, benefits, and total compensation through Remote’s unified platform.
  
  
• Ensuring compliance with local labor laws, including minimum salary requirements and pay transparency regulations.
  
  

For your convenience, Remote helps you get global compensation right, from base salary to total rewards. We invite you to explore Remote’s salary explorer to save time and money on compensation planning.