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Base Pay Definitions

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Base Pay Definitions

  • Course: Compensation 101
  • Module: Base Pay
  • Lesson Type: Video
  • Lesson Duration: 2:12

Lesson Content

In this module, we will focus on the basics involving base pay, including key definitions, approaches to designing base pay structures, and pay increases.

Base pay means a fixed rate that is paid to an individual in exchange for the services he or she performs as an employee. There are three ways in which base pay is paid:

  1. Salary, which is fixed compensation paid on a weekly, biweekly, semi-monthly, monthly, or annual basis to an employee for services performed. In general, employees in jobs classified as exempt are paid on a salaried basis.
  2. Hourly Rate. A fixed rate paid for every hour of work performed by an employee. In general, employees in jobs classified as nonexempt are paid on an hourly basis plus overtime for all hours worked over 40 in a workweek.
  3. Piece Rate. This is a fixed rate paid per piece produced or action performed by an employee regardless of time. Organizations may pay a piece rate instead of an hourly rate or in addition to an hourly rate. If paid instead of an hourly rate, the organization must make sure that employees are paid at least the minimum wage rate for every hour worked. In addition, employees who are paid on a piece rate basis must also be paid overtime for all hours worked over 40 in a workweek.

In addition to an individual’s regular base pay, an employee may receive additional pay, sometimes called premium pay. Additional pay is also fixed pay because it is paid at a fixed rate and guaranteed when performing certain work or performing work under certain conditions. Examples of additional pay include overtime, shift differentials, hazard pay, geographical differentials, and on-call pay.

Pamela Sande


Pamela Sande

Pamela Sande, CCP, is the Managing Principal of Pamela Sande & Associates, LLC. Pamela has over 25 years of human resources experience in both consulting and corporate roles, including as...

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