An employee’s paid compensation, before incentive compensation is applied, is referred to as base salary. For newly hired employees, a base salary would not include features such as a sign on bonus or other monetary awards.
An employee’s base salary is the minimum annual money received, or the standard salary that an employee receives for doing a specific job. It is also used to calculate other allowances, such as incentive compensation and employee benefits. When an employee shares in the cost of benefits, such as life insurance or medical care premiums, these items are payable from the base salary.
Employees paid a base salary are usually considered “exempt” employees. That is to say, they are salaried employees. Exempt employees are not paid overtime, and in the same way their pay is not reduced if they occasionally leave work early. This is different than the treatment of hourly employees, which are considered “nonexempt.”
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