When you agree to begin employment — whether it’s full-time, part-time, permanent, or temporary — you’ll sign an agreement that includes the terms of your employment, such as expected hours, work duties, compensation, benefits, and more. If you’re being paid a salary, that will also be established in this document.
For certain jobs, such as sales work, you may have what is called a “base salary.” Read on to learn more about what this means.
While “base salary” isn’t a common term in some fields (it’s simply referred to as “yearly salary” or “pay”), the term is highly prevalent in sales.
A sales base salary is the amount of pay that you receive before commission. Many sales jobs offer compensation that’s split between base salary, commission, and bonuses. Your base pay is the amount that you’re guaranteed to make regardless of your performance on the sales floor.
In 2020, the average sales representative made a median salary of $62,070. The highest-paid 25% made $89,030 and the lowest-paid made $43,580. That should give you an idea of the base pay you can expect to receive as a salesperson.
The way you are paid for your work is typically either through a salary or an hourly rate. Salaried employees receive a predetermined, fixed pay that may come in monthly, biweekly, or weekly installments. Hourly employees are paid solely for each hour that they work, and at a rate that meets federal and state minimum wage requirements.
The biggest difference between the two is the work expectations, not the pay. Those who are paid on a salary are expected to keep up with all their work responsibilities and tasks, even if it means working outside of their normal work hours. Hourly employees, however, are entitled to overtime pay at 1.5 times their usual pay rate if they work outside of their normal hours.
A base salary is essentially the bare bones of what you are paid for your work. It doesn’t include any bells and whistles. It is your income before any taxes are deducted. Bonuses, benefits, commission, or any other incentives are also not a part of base salary. As you earn more, remember to track your pay so that all your ducks are in a row when taxes do come into play. This is especially important when you are receiving a base pay plus any commission or bonuses. We recommend using a resource like QuotaPath to manage all of your income.
Your base salary is the minimum amount that you will be paid in exchange for your work. It may be expressed as an hourly rate or as a weekly, monthly, or annual salary. This is calculated before taxes or benefits or other deductions, so the agreed-upon rate may not be exactly what you are paid. Keep that in mind as you are agreeing to a base salary and a commission rate.
If your company pays its sales reps a higher base salary, then it typically pays a lower commission rate. If your employer pays a higher commission rate, it will likely pay a lower base salary. The typical commission rate for sales starts at about 5% of the total sales value that is earned each time they close a deal.
When you are offered employment, a company is offering more than just payment for your work. A compensation package is the full scope of the benefits they are willing to give you as an employee. A restaurant may provide free meals for every shift, a tech company may give you exclusive products early, or an established business may offer you healthcare benefits. The list below describes some typical parts of a compensation package.
For a sales position, the terms of your incentives, benefits, and pay will all depend on the employer. But let’s take a look at an example of what the breakdown could look like.
A sales rep who agrees to a base salary of $20 per hour would have an annual salary of $41,600. In addition, let’s say they get a holiday bonus of $10,000 and a commission of $1,000 per sale. In the case that they make one sale per month, that would be an additional $12,000 per year. The total income they would make in one year before any taxes or other deductions would equal $63,600.
Even so, their base salary is $41,600. Even if this sales rep did not make any sales or earn commission, they would still be paid their base salary.
It’s important to understand all aspects of your pay and how you will be compensated when you agree to work with any employer. Feeling confident about your base pay is a great start to getting the best employment package. Weigh all of your options and try to negotiate any terms that you feel could be improved.