A Guide to Understanding Base Pay and How It Changes

August 19, 2024

Understanding your pay slips might seem like a boring task, but it’s essential to make sure you know what is going on so you can take action if something is amiss. If there is an issue with your salary, you can’t always rely on your employer to notice this. You may need to take action to ensure you get everything you are entitled to.

Whether you are paid by the hour or you’re on an annual salary, you can expect to see “base pay” on your payslips. And if you’re interviewing for jobs, you might be given the base salary as a starting point for salary negotiations. Understanding what this means is essential to ensuring you get a great deal from your employer.

Read on to learn more about base pay, how to negotiate a higher base pay, and what other types of pay can influence your final pay cheque.

What is base pay?

Base pay is the standard amount you are paid for your job. If you’re not sure what your base pay is, look at your employment contract. This should outline the hours and days you are expected to work, how many holidays you are entitled to, and how much you can expect to be compensated for your labour. Your employment contract may also stipulate additional forms of pay that can boost your earnings.

Your base pay might appear as an hourly rate. For example, you might earn £15 per hour for your job. Your employer will then have to calculate how many hours you have worked, and this will form your base pay.

You could also be paid an annual salary. For example, your base pay for a sales role could be £25,000 in exchange for working Monday to Friday, 9am to 5pm.

Deductions on your base pay

Once you know your base pay, you can then begin to calculate your take-home pay by looking at the deductions. This will typically include:

• National insurance and income tax
• Student loan deductions
• Pension contributions
• Salary sacrifice schemes such as Cycle to Work
• Charity donations
• Trade union memberships

What can increase base pay?

It’s common for employers to offer additional perks on top of base pay to help incentivise workers. 

The most common adjustment to your pay slip will come in the form of an overtime payment. This is common for shift workers who may be paid at a higher rate for working outside of the usual working hours. 

Another common adjustment is a bonus. A performance bonus is common in the sales sector to help incentivise individuals to maximise revenue for the business. Some companies also offer all employees an annual bonus such as a Christmas bonus. 

You might also receive reimbursement for expenses incurred while at work. For example, if you use your own vehicle at work, you might receive a per diem amount to cover the cost of fuel plus wear and tear to your vehicle.

Your contract might also state that you receive commission based on meeting performance targets. This is different to a bonus as it will be linked to each individual sale you make. For example, if you bring a new client on board, you might earn 20% of their total billings.

What will impact your base pay?

When looking to maximise your earnings, you’re going to go looking for the roles that offer the highest possible base pay. There are a few ways you can increase your base pay by searching for specific roles. These are some of the factors that might impact your base pay:

• Industry – some industries pay more than others. For example, a marketing role in the finance sector is likely to offer a higher base salary than the same role in the charity sector.
• Location – accepting a role in a larger city will typically command higher base pay. If you work in London, your base pay should include London weighting, which is an allowance for those in the capital city to help with the higher cost of living. Other large cities are also likely to offer higher wages than smaller towns, but this is not guaranteed.
• Your experience – the more experience you have, the more likely you are to be offered a higher base salary. You can leverage your skills and experience to negotiate a higher rate of pay.
• Sector demand – when there is a shortage of workers with your skills, you can expect employers to respond by increasing base pay offered. This happened following the pandemic when there was a shortage of law graduates ready to take on junior roles. This led to companies offering much higher than average base salaries to secure the best graduates.
• Individual employers – some employers are more competitive in their base salary strategy than others. These are also more likely to offer regular pay reviews.

Negotiating a higher base salary

An important part of the recruitment process will be negotiating your base salary. You’ll need to consider the remuneration package as a whole, particularly when comparing offers from different companies. Most companies will have a little room to negotiate, and it’s worth asking for more if it will enable you to accept a role you’re really excited about.

Be wary about becoming reliant on things like bonuses and commission, as this could place additional stress on your finances if you have a less successful month or two. You need to make sure the base salary is sufficient for your needs and then factor in additional perks like bonus payments. Also remember that getting reimbursed for costs incurred is not really the same as increasing your income.

If you cannot negotiate a higher salary at the start, you could negotiate a scheduled pay rise after a specific period. Some companies will offer regular pay reviews, but others will rely on their workers asking for a pay rise. If the latter is the case, then you’ll need to keep an eye on industry trends to ensure that your base salary remains in line with the industry average.