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Is Base Salary before Taxes?

is-base-salary-before-taxes

ANSWER:

Base salary is BEFORE taxes.

What Is Base Salary?

For the great majority of workers, the extent of compensation is the amount of their hourly, daily or weekly salary, minus deductions. But for those working in sales and in other realms, compensation is sometimes split into multiple streams, with the amount of fixed salary being referred to as the base to go along with other compensation such as sales commissions, stock options and performance bonuses.

Base Salary $1??

In Silicon Valley, it is commonplace once a company has hit its profitable stride and become a publicly traded giant for its top executives to take a base salary of $1 per year. In some cases, there must be some sort of salary to support the legal status of that person’s employment. But it seems only natural that when one searches Google for examples of $1 base salary executive examples, the first results to come up relate to Google founders Sergey Brin and Larry Page, who in both 2009 and 2010 continue to receive a $1 annual paycheck.  Their colleague, Eric Schmidt, is in the same bracket.

In fact, the idea of a top executive receiving only $1 in annual base salary compensation has becoming something of an upside-down badge of honor, the sign of membership in a very exclusive club.  The trailblazer in this area is Apple CEO Steve Jobs, who has been collecting a $1 base salary since 1997 to go along with millions of shares in the company that he can sell at any time.

Advantages to the Minimal Base Salary Recipient

There are advantages to this sort of arrangement for the minimal base salary recipient. The taxation rate of a top executive’s salary in the United States is in the 35% range, while the tax rate for capital gains made from the sale of company stock is much lower, at 15%. So by entering into such an arrangement, top company executives benefit personally while arguably representing the very top echelon of the old salesman model of a worker being motivated by the incentive of overall company performance.

 

Resources

Marketwatch.com – “Top Google Execs to Get $1 Base Salary in 2010″, March 5, 2010, Retrieved August 29, 2010, from http://www.marketwatch.com/story/top-google-execs-to-get-1-base-salary-in-2010-2010-03-05-180270

Portfolio.com – “The 1 Executive Club” – March 26, 2008, Retrieved August 29, 2010 from http://www.portfolio.com/views/blogs/daily-brief/2008/03/26/the-1-executive-club/

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