What is the Base Pay Rate?

The base pay rate is the standard hourly wage paid to an employee. This figure is used as the basis for the calculation of overtime and certain fringe benefits. Thus, when the base pay rate is increased, it triggers several other increases in compensation expenses for an employer. Base pay is usually expressed as an hourly rate, but can also be stated as a weekly, monthly, quarterly, or annual rate.

Example of a Base Pay Rate

Evan Jones is paid a base pay rate of $30 per hour. His employer decides to give him a substantial raise, to $40 per hour. Because of this change in pay rate, the employer will now incur an hourly overtime premium of $20 per hour, rather than the $15 that it had incurred before. It will also need to pay a higher life insurance premium for Evan, since it is set at Evan’s annual compensation.