Base pay

What is base pay?

Base pay is the fixed amount of money an employee receives in exchange for their work, excluding bonuses, commissions, benefits, stock options, or other variable compensation. It is typically expressed as an annual or monthly gross amount before taxes and deductions.

This core component of compensation is outlined in the employment contract and serves as the foundation for calculating raises, severance, retirement contributions, and other financial benchmarks.

How does base pay work?

Base pay is agreed upon before employment begins and remains consistent unless renegotiated or adjusted during performance reviews, promotions, or market-based pay adjustments. Here’s how it functions:

• Payment frequency (e.g. monthly, biweekly) is determined by local laws and company policy.
  
  
• Payroll calculations use the base pay as a starting point before applying deductions or adding further earnings.
  
  
• Employee classification (e.g. exempt vs. non-exempt in the U.S.) can influence how base pay is managed and whether overtime pay is applicable.
  
  

Base pay is typically influenced by factors such as job title, industry standards, location, cost of living, and employee experience.

Why do companies use base pay?

Base pay provides structure, predictability, and fairness in compensation. Employers use it to:

• Clearly define the minimum guaranteed earnings for a role.
  
  
• Anchor other forms of compensation, such as bonuses or equity.
  
  
• Benchmark against internal pay bands and external market rates.
  
  
• Promote transparency and consistency in pay across teams and regions.
  
  

Examples of base pay in practice

• A marketing manager is offered a base pay of $80,000 per year, plus a 10% performance bonus and stock options.
  
  
• An engineer in Berlin and another in São Paulo hold equivalent roles but receive different base salaries in EUR, adjusted to reflect local market rates and cost-of-living differences.
  
  
• A company revises its pay bands yearly to ensure base pay remains competitive in the global market.
  
  

Base pay vs. gross pay vs. total compensation

The terms base pay, gross pay, and total compensation are often confused, but they’re not interchangeable:

• Base pay is the fixed pay, excluding any extras.
  
  
• Gross pay includes base pay plus bonuses, commissions, and other earnings before taxes.
  
  
• Total compensation includes gross pay plus benefits, stock options, allowances, and perks.
  
  

Understanding these distinctions is important for setting compensation expectations and negotiating job offers.

Things to consider with base pay

When setting or evaluating base pay, consider:

• Local market rates and industry benchmarks.
  
  
• Legal minimums (e.g. minimum wage, pay thresholds for visas or tax statuses).
  
  
• Currency fluctuations when hiring across borders.
  
  
• Internal equity to prevent pay disparities and support fair compensation practices.
  
  

How Remote can help

Determining and managing base salaries across countries can be challenging, especially when dealing with currency conversion, pay bands, and compliance risks. Remote simplifies the process by:

• Offering localised pay benchmarks to help you make competitive, fair offers.
  
  
• Managing payroll, benefits, and total compensation through our unified platform.
  
  
• Staying compliant with local labour laws, including minimum pay requirements and pay transparency regulations.
  
  

Remote helps you get global compensation right, from base pay to total rewards. Check out Remote’s pay explorer to save time and money on compensation planning.