How to Calculate a Base Salary
Under federal law, an employee’s salary is a fixed amount that makes up all or part of her pay, and she receives it weekly or less frequently. Her base salary is her income before incentives, such as bonuses or commissions, are added to her pay and before deductions, such as taxes, are taken out. Specifically, base salary is the employee’s standard pay for performing a particular job. When calculating base salary, keep certain factors in mind.
Determine the salary you will pay the employee. If a salaried employee is exempt from overtime, federal law requires you to pay him no less than $455 per week. Check with your state labor department for the minimum salary requirement for exempt salaried employees. If the employee is not exempt from overtime, pay him at least the federal or state minimum wage, whichever is higher.
Multiply the annual salary by the number of pay periods in the year to arrive at the employee’s base salary for the pay period. For example, $52,000 per year / 24 semimonthly pay periods = $2,166.67.
Subtract the employee’s deductions from her base salary to arrive at her take-home pay. This includes payroll taxes and employee benefits, such as health insurance or a retirement plan premiums.
If the employee receives an incentive, you can add it to his base salary before taking out deductions; or you can pay it as a separate check. Contact your state labor department or the United States Department of Labor, Wage and Hour Division, if you are unsure of whether to label a salaried employee as exempt or nonexempt.