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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Base Pay
When you are looking to take a mortgage to buy a new home or refinance your current mortgage, your lender will qualify you based on a few parameters like loan-to-value, Debt-to-income, and credit score.
To calculate debt to income, the lender would require your monthly debts and your income.
One of the things that your lender will consider while analyzing your income is your base salary. In this post, we will understand what is base pay in detail.
What Does Base Pay Mean?
Base pay, also known as base salary or basic salary, is a specific amount of money paid by an employer to employees in exchange for work performed.
This term does not take into account salary incentives, bonuses, overtime, or any other company remunerations.
When you apply for a job, the employer will offer you basic pay for your specific skill set.
If you accept the offer, your job description may also include additional details about other financial aspects of your future salary.
However, your suggested base salary remains constant. This is usually called an hourly rate, annual basic salary, or basic monthly income.
What Is The Difference Between Base Pay And Total Gross Pay?
Total gross pay refers to an employee’s total compensation, including all bonuses, benefits, insurance, overtime pay, etc.
The basic pay is the minimum fixed amount that an employee is compensated with for the type of work he or she does.
In addition to base salary, other components of compensation are likely to vary from year to year because they are based on many factors, such as business revenue, division performance, individual employee performance, and so on.
Special benefits and bonuses are usually affected based on these factors. When you are applying for a mortgage or refinance your current one, the lender will consider your gross monthly income to calculate the debt-to-income ratio.
However, the variable should also show some consistency so that the lender can take the average of the variable component for the calculation of income.
Who Receives The Basic Pay?
Base pays are typically paid to professional or exempt workers. These are workers who meet the criteria for an exemption from federal overtime laws under the Fair Labor Standards Act (FLSA).
They are usually professionals, managers, administrators, and also computer-related employees who must earn more than $684 per week and pass additional tests related to their job duties to be exempt from overtime pay.
The employee who is salaried is not required to record the number of hours worked and is not paid for overtime work.
This distinguishes it from a non-exempt or hourly employee who is paid by the hour. The overtime is paid to non-exempt employees who work more than forty hours in a week.
How Is Base Pay Calculated?
The base salary is calculated based on the minimum wage rate per hour. The minimum wage rate depends on the employee’s skill set and experience.
To calculate your basic salary every month, you just have to multiply your minimum wage rate by the number of hours you are expected to work for a week, (usually 40 hours) and then multiply it by four.
For example, if your minimum wage rate is $25 per hour then your monthly basic pay would be $25 x 40 = 1,000 x 4= 4,000. In this example, your monthly basic pay would be $4,000.
Conclusion
Basic pay is one of the most important parts of a working individual. To qualify for any credit or loan, if you have good basic pay, you have a higher chance to be qualified for the amount of money that you are looking to borrow.
Your basic salary depends on your skill set, geographical location, industry, etc. You can find the information on base salary in the U.S Bureau Of Labor Statistics
