Employee compensation is a highly sensitive topic in the business world: it is subject to strict regulations, including the introduction of the guaranteed minimum wage (or SMIC). Whether you are an employer or an employee, it is therefore imperative that you know what your salary is made up of, especially after deducting certain charges.
To understand how these elements fit into the overall management of your payroll, read our article: Payroll: Definitions and explanations
What is base salary?
In the business world, salary generally corresponds to the compensation paid by the employer to the employee. It is strictly regulated by the employment contract, which sets the base salary according to an agreement between the two parties. However, let us remember that this agreement must be able to be exercised within the regulatory framework in force. Indeed, all employees must be paid the minimum wage (SMIC) – a guaranteed minimum wage, currently set at €11.07 gross per hour or €1,678.95 gross per month since August 1, 2022 (for full-time work) (1). For more information on this subject, you can consult the Labor Code (articles L3231-2 to L3231-3 (2).
The basic salary or basic monthly salary (SMB) corresponds to the gross salary, i.e. the remuneration paid before deduction of social security contributions, and before the payment of social security benefits. It is generally the subject of negotiation between the employee and the employer, precisely at the time of hiring. But it can also be set by decision of the employer, subject to compliance with certain legal and contractual rules.
To correctly establish its amount, bonuses and overtime must also be deducted. The basic salary generally appears prominently on the payslip, on the first line. However, it can appear differently on the employment contract and in several ways (monthly salary, annual salary, hourly rate, or hourly wage).
What is the difference between base salary and gross salary?
Base salary corresponds to the remuneration agreed between the employer and the employee, and its amount cannot be less than the minimum wage.
In comparison, gross salary corresponds to the sum of the amounts received by the employee during the month, before the deduction of social security and tax contributions (3). Among these amounts, we can notably find a certain number of "variables", such as bonuses, salary increases due to overtime, as well as benefits in kind (generally negotiated during the job interview and which most often take the form of the provision of goods or services by the employer). Gross salary appears a few lines below base salary on the pay slip.
Can base salary be changed? ?
The method of remuneration, as well as the amount of the salary, can be subject to modification, by simple agreement between the employer and the employee. At this stage, it is therefore impossible for the employer to unilaterally make a change in remuneration that would in fact result in a modification of the employment contract. To be convinced of this, we refer to the decision of the Court of Cassation of September 15, 2021, which stipulates that "a collective agreement cannot allow an employer to modify the employment contract without obtaining the express consent of the employee" (4).
What are the different possible methods of setting the basic salary?
As we have just seen above, there are several ways of setting the basic salary within the company. For example:
- "By time", that is to say according to the actual working hours. This is the most common method of determining wages.
- "Performance-based": This method is established based on employee productivity. It therefore does not take into account the number of hours worked. It therefore essentially meets known and pre-defined standards, as may be the case with commissioned salespeople, mechanics paid at a fixed rate, and piecework workers.
- "Fixed-rate": In this specific case, a fixed-rate agreement must be established between the employee and the employer, in writing. It must be precise and quantified, and scrupulously respect the guarantees provided for by the Labor Code.
Elements excluded from the base salary
To correctly define the base salary, it is imperative to exclude certain elements such as salary supplements, whether legal, contractual, or allocated at the employer's initiative. Among these (5)
- Mandatory or exceptional bonuses: in the first case, bonuses are provided for in the employment contract, or through a collective agreement. They are an integral part of the salary. In the second case, bonuses are one-off or "voluntary" and are awarded, for example, as part of performance-based bonuses. Their amount can be variable and left to the employer's discretion. Examples: seniority bonus, vacation bonus, activity and performance bonuses, bonuses for irregular working hours or dangerous work, etc.
- Tips, commissions, and benefits in kind.
- Compensations (such as vacation pay, severance pay, etc.).
- Salary supplements (such as non-compete compensation).
How to calculate the basic salary?
Now that you know what the basic salary corresponds to, it may be interesting to better understand the calculation basis for determining it. Generally, the amount of the minimum wage is obtained by multiplying the gross hourly remuneration by the number of hours actually worked by the employee in a month, and for 35 hours per week (i.e. 151.67 hours per month). In other words, the employee receives remuneration based on their weekly working hours, which are themselves calculated on a monthly basis.
Let's take an example: you have just hired a full-time employee, who works 35 hours per month – and who should therefore be paid 151.67 hours per month. If you apply an hourly rate of €13 to your basic salary, this gives the following calculation: 151.67 x 13, or a salary of €1,971.71 (which therefore makes an hourly salary of €13 gross).
(1) https://www.vie-publique.fr/questions-reponses/281551-le-smic-en-quatre-questions
(2) https://www.service-public.fr/particuliers/vosdroits/F2300
(3) https://dares.travail-emploi.gouv.fr/definitions-et-concepts/salaire-de-base-smb
(4) https://travail-emploi.gouv.fr/droit-du-travail/la-remuneration/article/le-salaire-fixation-et-paiement
(5) https://www.urssaf.fr/portail/home/employeur/calculer-les-cotisations/les-elements-a-prendre-en-compte/elements-de-remuneration-primes.html
