To cover expenses such as bills, car payments, medical insurance, and other costs of living, you need money, right?
If you’re lucky, you could get a base salary, fixed wage, or hourly wage for your yearly job. But what is the difference between base salary and overall pay?
Comprehension of the contrast between salary and total compensation for a particular role is essential. Your total compensation will encompass many elements that may not be covered by your salary alone.
What does base salary refer to?
A base salary is given to exempt workers for undertaking their roles. An exempt employee obtains a preset sum regularly, rather than being compensated on an hourly basis. Generally, to qualify for a base salary, the worker will normally require a situation that provides them authorization to apply unrestricted discretion in their work. They can analyze and act on essential duties while not needing direct supervision. This type of personnel’s base salary is stated as gross profit before deductions are taken out.
Those that wish to be classified as exempt from overtime pay must meet criteria outlined by the U.S. Department of Labor and earn an amount exceeding the minimum base salary set by the federal government. Otherwise, employees should be reclassified as non-exempt and receive overtime pay for any hours worked beyond 40 hours per week.
Types of remuneration that equal total compensation
Full compensation is articulated similarly to a base salary, which calculates gross pay for one year. Notwithstanding, it entails more than just money paid to work but sometimes includes a benefits package or various fringe benefits. Full compensation comprises the base salary and the value of any other advantages acquired over and above salary expectations. Some of the rewards that are regularly included in a full compensation package could include:
- Commissions, relocation expenses
- Vacation days, sick days, and holidays off
- Profit-sharing distributions, stock options
- Health insurance; medical, dental insurance, disability, and/or life insurance
- Tuition assistance
- Child care assistance
- Retirement plans
- Employee assistance programs; i.e. legal and counseling advice
By delivering an annual total compensation statement that includes the base salary as well as any additional benefits, a company can help an employee understand the full worth of what they are given. This is especially beneficial to employees who may be unaware of how much money they receive in total compensation.
Certain businesses utilize total compensation statements as a method of employee retention, to show their worth and make them feel appreciated. Without accounting for the range of additional benefits they are receiving, an employee who is interested in other work opportunities could determine their wages based on the base salary alone. When evaluating job offers, it is wise to evaluate the entire compensation package instead of solely focusing on the base pay.
Salary versus total compensation
A worker’s compensation typically merely accounts for the assets they get paid for regarding their labor in an occupation. This is commonly stated as a yearly figure, as opposed to an hourly rate, and does not take into account any levies that must be retained or any other deductions. In total, remuneration differs in that it allows the employer to offer any rewards clerked for, either fully or partly. It also involves any non-taxable entities presented to workers, such as definite types of assurance side-coverings, teaching aid, and most funds made obtainable for staff to use staff traveling outlays.
Non-cash benefits, which may include certain defrayal designs in money like yearly bonuses or commissions, are usually comprehended as part of an overall compensation package. All monies put forth by the employer for retirement strategies or life assurance policies would also be considered a component of your comprehensive compensation. Many of these allowances are not paid through cash, like coverage plans, allotted vacation time, and other military advantages.
Determining total compensation
To find out your total compensation, you can follow a few steps to figure out how much your employer is providing in return for the work you do:
1. Start with your base
Getting your total compensation requires knowing your base salary. Review your pay stub to find out how much you earn and if the total annual salary isn’t included, multiply the gross amount by the number of pay periods to calculate your gross base salary figure.
2. Add time-off benefits
Most employers furnish their workers with time-off advantages. This could be made accessible in numerous choices, such as illness leave, vacation time, and/or festivity remuneration, or it might be given as a full number of salaried days off. To gauge your gross payment, you must value the worth of the paid days off you get in one year. Multiply the number of days away you are granted across all the salaried days off compartments by the amount of money you make for a work day to get that complete amount.
3. Figure out insurance costs
Generally, full-time workers are entitled to obtain insurance benefits from their employers. Companies with a particular amount of personnel must provide insurance. Furthermore, the portion of any insurance benefits given to you that is paid by the employer should be incorporated into your overall remuneration estimate. You will need to add the cost of health, dental, vision lifetime, incapacity, worker’s indemnity, joblessness, and any auxiliary insurance policies.
3. Insurance costs
Regularly employed persons ordinarily qualify for insurance protection through their employers. Offering insurance is compulsory for employers with a predetermined amount of staff members. The portion of any insurance benefits given to you, paid by the employer, must in addition be factored into your full remuneration assessment. You will have to add up the worth of medical, dentistry, sight, handicap, worker’s repayment, joblessness, and any extra insurance policies to come up with the aggregate amount. Check if any commissions and bonuses apply.
Employees in various roles, such as sales representatives, recruiters, account directors, and real estate agents may receive commissions and additional payments based on how well certain tasks are completed. This system is most commonly seen in sales roles due to the direct correlation to their income goals.
Depending on the terms of your agreement, commission payments may be a supplement to your base salary or make up most of your total compensation. It is essential to calculate these commissions to determine the amount that you are rightfully owed. Calculations for commissions depend on the specifics of your contract.
For instance, if your annual salary is $100,000 and half of this is performance-based, you’re ensured to get $50,000 a year and could gain another $50,000 on top of that. Make sure you also factor in any bonuses you might be eligible for when calculating your overall compensation amount.
Evaluate additional perks
Many employers provide retirement benefits for their employees and will contribute to retirement savings accounts. This should be included in your total compensation, and other extra benefits may include tuition assistance, gym memberships, parking/commuting expenses, or childcare assistance.
In the End
Having steady employment and/or additional income sources can help you manage your expenses, allowing you to survive, pay bills and maybe even have some fun.
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