Base pay and base salary refer to what your employer pays for a week or an hour or a year of your work. If you do your job for X period of time, you get Y amount of money; that's the base pay. This figure doesn't include benefits that might push your total compensation higher than your base pay.

Base Pay vs. Compensation

If you see a job ad that says "base pay $20/hour," that means you earn $20 for every hour you put in. The same principle applies if it's $700 a week base pay or $60,000 a year. This isn't the amount of your regular take-home pay, it's the gross pay before taxes, 401(k) and other deductions are taken out.

Compensation is defined slightly differently than base pay: it's is the complete package you receive from your employer for your services. For a low-skilled, hourly job, compensation may be the same as base pay, plus tips or overtime wages. Higher-paying jobs typically offer significant benefits beyond base pay:

• Sales commissions
  
• Bonus Pay
  
• Merit pay
  
• Stock options
  
• Pension
  
• Health insurance
  
• Vacation benefits
  
• Use of a company car
  

Stock options and bonuses for performance can turn an adequate base pay into a stellar compensation package. A company that commits to a set base pay or annual base salary in a job listing can pile on benefits to boost compensation if it really wants to land an applicant.

Wages vs. Salary

Base pay can be either base wages or base salary. Someone new to the working world might think they all sound the same, but the difference between the salary definition and the wages definition is legally significant.

Someone paid a base wage is paid by the hour. If they work more than 40 hours in a week, they're entitled to overtime pay on top of their base pay. A salaried employee is exempt from overtime pay because their base pay is a set amount per week or per year, regardless of how much they work.

For example, someone who earns $20/hour base wages and works a 40-hour week makes $800 a week base pay. If the boss has them put in another 10 hours, they make $30 per hour in overtime, a total $300 in extra compensation. If the person earns a base salary of $800 a week and has to put in an extra 10 hours, they don't get any overtime.

The flip side is that a company can't usually dock a salaried employee's base salary because their work is poor or the employee didn't put in a full 40-hour week. The law does allow for exceptions. If a salaried employee takes off a full day or more, then the company can take money out of his base salary. If the employee is home sick for a day or more, their boss can require them to take sick leave.

There's an obvious advantage to an unscrupulous employer who classifies hourly workers as salaried and therefore unable to claim overtime. Under federal labor rules, a company can't say someone is salaried and exempt unless the job meets certain other standards. At time of writing, the minimum base pay for an exempt employee is $455/week, or $23,600 a year. If the worker stocks shelves or staffs the checkout line that doesn't qualify; it has to be a "learned profession" such as a doctor or lawyer, or a manager. More precisely, the worker's primary job has to be management: they must supervise at least two employees, and must have power over them, such as hiring, firing, promoting or assigning tasks.