Salary levels are as important to the employers that offer and pay them as they are to the workers who receive them. Basic salaries can be broadly defined as the salaries workers in a group earn, and projected salaries as the likely salaries they will earn at a given point in the future. However, for businesses and public sector employers the issue of defining and estimating salaries is a necessity of doing business.
Basic Salary Definition
Basic salary can refer to the base wages that workers earn, or wages within more specific parameters. When the term "basic pay" refers to base pay, it represents the salary that a new worker earns upon starting in a given position. Public sector employers, such as local governments and fire departments, each define basic salary according to their own regulations. Basic salary is usually limited to regular wages and doesn't include special payments or other earnings outside of a standardized salary rate that includes longevity pay. Basic salary may determine a worker's level of benefits or eligibility for higher salary rates in the future.
Projecting a salary is the process of accounting for likely salary increases for a group of workers. The result, which relies on a number of different factors and requires some estimating, is the expected salary at a predefined point in time. Projected salary is usually expressed as an average per worker, or a percentage increase over a base salary level. In the context of projected salary for a public sector employer, basic salary can refer to current payroll costs while projected salary stands in for future payroll costs.
Several factors impact salary increases, all of which are essential to making accurate projections. Public sector workers generally receive raises for length of service. Cost of living increases also affect salaries going forward. As senior workers retire and new workers take positions in a workforce, average projected salary decreases. Pay scales force employers to regularly increase salaries for workers with union representation or collective bargaining agreements in place, driving projected salary averages up. Projected salary does not account for changes in the size of a workforce due to expansion or job cuts.
Employers project salaries to discover the impact of labor costs to their budgets. Payroll is a major source of operating expenses for many types of employers, including public sector agencies and departments. Anticipating salary increases allows an organization to set aside resources or alter its cash flow to ensure it can pay its workers. When projected salary is more than an agency expects to be able to afford, it may need to cut its workforce or, if possible, adjust salary schedules to keep costs under control.