Basic Salary Meaning

Budgeting for employee compensation means taking many costs into account, including basic salary.

This is the set wage you pay hourly or monthly to someone who works for your practice. Basic salary is the starting point when you develop a scheme of how to pay members of your practice. It sounds straightforward, but the little perks and obligations mean your HR budget can stretch well beyond base pay.

Base pay, base wage, and basic wage all refer to basic salary. It doesn't include any extras or additional costs associated with hiring such as advertising and recruitment costs, nor does it account for overtime, shift differentials, benefits, and other components of compensation packages.. Your people are worth it — but to keep the accountant happy, it pays to understand the ins and outs of employee compensation.

What is Basic Salary in a Budget?

Basic salary is not the same as gross salary or net salary. Gross salary is the amount employees make before taxes and other deductions. Net salary is what they take home after the withholding of taxes and these other deductions.

It is also not the same as the government-mandated minimum wage; the basic salary is the wage you set before you account for all of the extras. 

Gross salary and basic salary may be similar; however, an employee's gross salary varies from pay period to pay period. In a particular month, overtime earnings may cause an increase in gross salary, but the basic salary — which does not include overtime — remains unchanged.

To make things even more confusing, annual pay includes overtime, bonuses, and other additional payments over a year, while basic salary does not.

Does Basic Salary Alone Make Up an Employee Compensation Package?

In a word, no.

Most employers offer additional perks beyond base pay. These include pensions, bonuses, health and dental coverage, paid vacation, and any other benefits that cost the practice money. Optometrists may give employees free eye exams and discounts on prescription lenses. Veterinarians may provide pet care to employees at a reduced cost.

These are the tools you have to attract the best people to the practice. You can attach a dollar value to each one. Employees are valuable to the practice, so you want to treat them well — but the hidden costs can add up quickly.

That's why it's important to do an overall budget assessment of the long-term expenses associated with each employee before you bring on a new team member. Basic salary is just one line item.

What Doesn't Qualify As Basic Salary?

There are a few other cost outlays that are not part of base salary. They may also be invisible to employees, so they won't help with recruitment or retention. You have to pay a matching amount for Social Security and Medicare taxes, for example, in addition to the employee's contribution. This adds to your personnel costs.

Paid sick time, overtime, even things like premium payments for certain shifts — the practice may offer a higher wage when an employee works overnight, for example — are not part of basic salary. When you're budgeting, take a few minutes to brainstorm or refer to your current employee costs to come up with an estimate.

How Can You Use Basic Salary to Compare Employee Costs?

Especially for a small practice, or one just getting started, it helps to know the basic salary for your essential positions. To be competitive when recruiting the best people you should know the going rate. An excellent source of information, besides industry newsletters and the advertisements of competitors, is the Bureau of Labor Statistics (BLS). This allows you to drill down to region and type of practice.

For example, according to the BLS, the median basic salary nationwide for a dental hygienist working in the Federal Executive Branch in May 2019 was $29.54. For those in dentists' offices, it was $37.28. For what the BLS calls "medical secretaries and administrative assistants," the median hourly basic wage in May 2019 was $21.21 in California, $17.14 in Ohio, and $16.68 in Texas. Depending on where you are in the country, you may have to pay more or less to get the best people.

Building upon basic salary, you can develop a suitable compensation package for prospective employees. You can use an HR solution like the one offered by HR for Health to develop an applicant tracking system (ATS) and monitor employee performance.