HR Glossary
Basic Pay

Basic Pay

Updated on:
August 22, 2022


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Table of Content

What is Basic Pay?

Basic Pay is the minimum fixed amount of money paid for a job before anything extra is added, like bonuses, allowances, or any such compensation.

A basic pay rate is defined in a collective bargaining agreement or as it is commonly referred to at a company level, a wage schedule.

Generally, an employee’s base pay is fixed, meaning it does not change regardless of performance or behavior. This type of pay is known as straight-time pay and the employee is paid the same amount each week.

Many companies offer bonuses and incentives to employees in order to motivate them. Bonuses are defined in the collective bargaining agreement or as a company policy.

How Is Basic Salary Calculated and Paid?

Salaried workers receive the same fractional amount of their annual basic salary every payday. To determine the amount, their annual basic salary is divided by the number of pay periods in a year at that company. For example, if the company pays workers twice each month, there will be twenty-four paydays in a year and the employee will receive one twenty-fourth of their annual basic salary on each payday.