Base pay is derived from factors such as market data or internal comparison for a defined period. This model may or may not incorporate merit into the base calculation.

This category is also defined by the absence of incentive pay.  Base salary, which usually consists of 50 percent to 75 percent of the total compensation package, should represent the position’s core responsibilities and reflect internal and external market compensation scales. Variable compensation, which makes up the remaining percentage, should be based on performance and tied to measurable activities and results. Variable pay should support the desired strategic initiatives of the organization in terms of revenues and volumes. Merit pay, annual cost-of-living increases, market value adjustments, and bonus pay are typically in addition to the core pay mix.