Basic salary
What is basic salary?
Basic salary, sometimes also referred to as base salary, is the pay that an employee earns in exchange for their work, prior to any additions or deductions.
Common examples of additions to basic salary include:
- Bonuses
- Commission
- Tips or gratuities
- Overtime payments
- Remuneration for expenses
- Allowances, such as a uniform allowance or a working from home allowance
Common deductions from basic salary include:
- Tax and National Insurance contributions
- Pension contributions
- Salary sacrifice schemes, such as travel and childcare vouchers
- Private medical or dental insurance
- Student loan repayments
- Union subscriptions
The amount of money that an employee receives can be dramatically different to their basic salary once additions and deductions have been factored in.
How to convert basic salary into an hourly rate
Salaried workers receive the same basic rate of pay each payday, unless they receive a pay rise. However, sometimes it is necessary to convert base salary into an hourly rate of pay to ensure that workers are paid above national minimum wage, or above national living wage if that is the minimum wage standard that the employer commits to. Where the worker is contracted to work a regular number of hours per week:
To convert basic salary to an hourly rate, first divide the annual salary by 52:
Annual salary / 52 = weekly salary
Next divide the weekly salary by the number of contracted hours per week:
Weekly salary / number of weekly contracted hours = hourly rate