5 Tricks Played by Employers to Fool You With High CTC (Cost to Company) Salary

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5 tricks played by Employers to fool you withhigh CTC (Cost to Company) Salaryby Manish Chauhan 131 comments

It was campus placement month, and although everyone declared that they wanted to do qualitywork once they were placed, they also harbored a secret desire to get placed at the highest salary.When we used to look at our pocket money and compare it with the salary package offered bycompanies, we used to feel we would sleep on bundles of notes.

The top students of my batch were placed at extremely high pay packages, and they were proud tohave cracked it. However the average students and other not so lucky ones had to settle forlower pay packages.

The Very Happy and Only Happy students left for the next phase of their life. The bitter truthhowever, only emerged after a year or two that the take home salary of most of the students wasnot that different from the rest. While the students who got high packages were obviously earningmore than the others, the difference was only marginal.

The CTC (Cost To Company) numbers had fooled us!

CTC vs Take Home salary

5 tricks played by Employers to fool you with high CTC (Cost... http://webcache.googleusercontent.com/search?q=cache:8bs...

1 of 28 31/03/15 2:22 PM

What is CTC (Cost to Company)What was happening was that the companies were exploiting our human craving for InstantGratification. Job Seekers want big salary numbers its a benchmark which they use to comparethemselves with others. It feels nice to say, my package is 12 lakhs per annum, even if you onlyget 58,000 per month in hand.

CTC or cost to company is what a company spends on you. If something is an Expense for acompany because of you, its part of your CTC, as simple as that. So starting from the airconditioning you use at office, to the food you eat at office, everything can be part of CTC. Here isone how one of our readers Nandan feels

I fell for a similar trap while joining an IT MNC recently (from another which was equally good atinflating its VP compoment). Its been only 3 months now since I joined this company and theworst part is that the take home I get now is almost same as that I was getting in my earliercompany (though on paper the CTC is having 35% hike over the previous company CTC) Link

5 tricks to increase CTC numbers and give wrong impression to employeesThere are several ways companies can inflate the CTC Numbers and give you an impression thatyou are getting the best deal, only for you to realize later that the other job was better. Let me nowshow you some ways companies increase the CTC numbers.

Trick 1 Including their EPF share inside the CTC itself

The first time I saw my salary slip, I was somewhat shocked to see that my employer wasdeducting the employers share of EPF from my salary. I was wondering If its the employersshare why are they deducting it from my salary? It was only later that I realized that this wasmerely a simple trick to inflate the CTC. They could have just reduced my CTC by an amountequal to employer share of EPF and could have paid it separately, but then my CTC would belower even though I would have been getting the same salary at the end of the day.

Trick 2 Adding One time Bonus in CTC at the time of joining

When I joined my first job (and the last one), I was very pleased to hear my CTC; it was amongstthe highest packages on campus. But then my salary in hand correlated poorly with the CTCfigure. In my mind, I had divided my CTC by 12 on the day of placement and was on the top ofworld. Though what happened in reality was that I was supposed to get a one time joining bonus(that too after many months), and that figure was added to the final CTC inflating the numbersubstantially. It was only for first year, not a regular thing !

Trick 3 Adding Stock Options in CTC

Another simple trick employers play is to add your Stock Options to your CTC. Stock Optionsagain are not a regular payment source, however they do increase the CTC considerably. You canlearn about stock options, RSUs and ESPP here in this article.

Trick 4 Adding Insurance Facilities, Food coupons, Transport Facilities to CTC

At the end of every month, we used to get food coupons from our company. We also had paymentsmade by the company towards yearly life insurance and medical insurance. The thing is, you do


2 of 28 31/03/15 2:22 PM

not get these things as CASH, but instead as benefits. However, the company adds all these to yourCTC figure, as it is paying for it.

Trick 5 Putting Large chunk of variable component in CTC

Another famous trick played by companies (especially those in sectors that are performancebased) is to add a considerable amount of variable component to the salary and keep the fixed partsmall. The CTC number is then provided based on an average performance assumption. Forexample if your CTC was Rupees 10 lakhs, it could happen that 4 lakhs of the CTC would beFIXED and the remaining 6 lakhs would be variable. The part of the variable componentultimately paid to you could go down or up depending on your performance or some parameterthat supposedly would be under your control. It could be sales, the number of clients you bring inetc. etc.

Start-ups vs Giant MNC companies Difference in Salary StructureIn my limited experience, pay packages offered by startups or smaller companies are more or lesstransparent, and artificial increases in CTC are limited. Dividing the CTC figure offered by theminto a monthly number will get you very near to your take home salary though it will obviouslybe lower. However, in the case of larger companies, the CTC number is inordinately inflated andyour eventual take home salary might give you the feeling Seems like there is some mistake inthe calculation.

Joining other company for higher Salary ?

Just because you are getting a higher package in some other company, does not automaticallymean that your take home salary will increase by the same margin. It may happen that your takehome salary increases by very little, or in the worst case scenario, stays exactly where it was. Whatyou should focus on, while moving to another job, is the additional increment in your take homecomponent and not just the change in CTC.

In the image below you can see how a job with low CTC can lead to a higher take home salary all because the package with the higher CTC was inflated by injecting various components.

High CTC vs take home salary

I hope from now on, you will focus more on the final take home and not be fooled by CTCnumbers.

Any personal experiences?

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{ 131 comments read them below or add one }

1 Aravinth September 2, 2013 at 9:49 am

Yep, this is absolutely true. I am still travelling on the same boat!

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2 Manish Chauhan September 3, 2013 at 2:01 pm

Thanks for sharing . can you explain your case ?

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3 RP September 2, 2013 at 10:45 am

Hi,I recently joined an IT MNC and They offered me 60% rise at the time of joining and theyhad 18% of fix pay as variable pay. But however in the first year they hardly paid me 2% ofthat.

thanks,RP

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4 SameSaga September 2, 2013 at 11:15 am

Its Accenture

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5 RP September 2, 2013 at 12:05 pm

Yes. Its Accenture.. :)

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6 abhisheka September 2, 2013 at 2:44 pm

Thats very helpful comment for me! If got any opportunity there :)

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7 RP September 2, 2013 at 3:06 pm

Before accepting the offer ensure that you get your desired fix pay.


4 of 28 31/03/15 2:22 PM

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8 RK September 2, 2013 at 11:21 am

I guess its Accenture which is having higher VP and lower Payout at year end..

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9 King September 2, 2013 at 11:31 am

Yes this is there since long time.So we must ask that iam getting this much permonth take home and iam expecting thatmuch hike to accept your offer.You must do a salary negotiations based on Take home salary . not on CTC.

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10 Amit September 2, 2013 at 11:38 am

I am not sureBut That is not wrong practice by companies..CTC does mean Cost to thecompany..so all the component which has been mentioned in article is called part of CTConly.Can not be counted seprately. In simple waycost paid by company for oneparticular employee..All the components are some how given to employee only. Iwould rather sayThe way employee look at this CTC is wrongCTC is never meant forEmployee Employee should focus on or ask about what is take home salary to HR..thisis right and important point to know about their salarythen they should compare it withsalary they were getting.

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11 Sathya Thambusamy September 2, 2013 at 11:52 am

I agree with Amit, only when these are not properly disclosed would they becomeunethical. When they are disclosed they all contribute to some benefit enjoyed byemployee.

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12 cbrcoder September 2, 2013 at 2:43 pm

By that logic, they should also mention the electricity used by employee while atwork, the water and rent charges per employee etc! Cost to Company makes no sense.You cant compare CTC

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13 Jai September 3, 2013 at 9:34 am

@cbrcoder Letss say if that particular employee is not required, insurance,food etc which is part CTC will be saved. This is not the case with electricityetc as no matter if this employee joins or not, operating expenses will continueto occur. I agree, employee should be more cautious to review take home pay


5 of 28 31/03/15 2:22 PM

before joining.

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14 NAGAMOHAN M September 2, 2013 at 11:55 am

Some Companies even consider Gratuity(Which is payable 5 years from the date ofjoining),Super Annuation, EL Encashments as part of their CTC,Which makes the ctc figurelooks big.But it is very clearly mentioned as Cost to Company not as Cost to Individual sowe should have to work at take home pay and decide accordingly.I dont find any fault withthe Employers,It is our duty to study the CTC structure in complete.

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15 Srinivas September 2, 2013 at 12:10 pm

CTC means Cost to the company. One should not take it as take home salary. If one seesfrom this perspective, company is right to include all the points mentioned.

If this distinction is understood, there will be less confusion.

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Yes. The article aims at that only .

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17 Nandan September 2, 2013 at 1:52 pm

I fell for a similar trap while joining an IT MNC recently (from another which was equallygood at inflating its VP compoment). Its been only 3 months now since I joined thiscompany and the worst part is that the take home I get now is almost same as that I wasgetting in my earlier company (though on paper the CTC is having 35% hike over theprevious company CTC) :(

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thanks for sharing your case Nandan . I added it to original article ! , Thanks forcontribution !

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19 abhisheka September 2, 2013 at 2:41 pm

Many times we just ignore very common terms, have lots of meaning behind it.

Must read for students.


6 of 28 31/03/15 2:22 PM

Thanks Manish

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thanks

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21 manyam September 2, 2013 at 3:09 pm

Yes, employees need to focus on asking what is my take home during discussion with HR.But I never heard Aircon charges adding into CTC :-).

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Yea .. This is what they have to focus on !

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23 Maulik September 2, 2013 at 3:17 pm

I disagree with this article. This article is confusing and not educating. By excluding all thecomponents you are ingnoring the benefits you get out of it. Just an example lets saymedical insurance in provided by Company A to entire family including dependentparents and other Company B providing same insurance but only to the employee. In thiscase naturally the terms of Company A are more favourable than B assuming everythingelse same. One should not see only take home but see various aspects involved. While Iunderstand that variable part should be also calculated with the pinch of the salt andEmployee has to be more diligent in considering that.

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24 Robin September 2, 2013 at 8:30 pm

Manish isnt calling it unethical. Someone who understands the break ups will notcomplain about the CTC concept. But most learn slowly and the hard way. A lot ofthings are not understood when fresh out of college. Companies will increasecomponents in the CTC to get better hiring slots in campuses. While I agree thatcertain pieces dont convert to in hand but do add to savings or benefits a goodthing I would say. But there are some annoying tricks as well. In my case CTC wasbumped up by 1.5 lacs ( in 2007 ) as relocation package, Sad part was I could get onlywhat I could use. Since this was one time, next year the CTC went down, bizarre.

Manish reminds me of our place cell days :)

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25 Manish Chauhan September 3, 2013 at 10:51 am


7 of 28 31/03/15 2:22 PM

Yes. A lot of things dont covert, but helps like EPF, Trasportation, goodcoupons etc . So On a second look I can see that there is Good component andthen there is Bad component . Bad component in CTC is something which onecant use all the time and is one time , like Bonus , RSU etc.

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Maulik

All the article is doing and showing people how things happen . A lot of freshers arenot aware that CTC is not salary . You can say that they should know the basic thingslike these, but thats what the article is doing.

However, I agree with you that the article should have also mentioned that a lot ofthings which are not in hand, are extremely beneficial to employees, but the mainpoint of the article was that CTC can be very desceptive at times. What do you think ?

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27 A September 24, 2013 at 8:20 pm

Maulik The way to see is salary is not equal to CTC /12. Most of them get confusedwith CTC and assume they have got that much salary. See benefits and take home payas separate entities before accepting an offer.

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28 Joel Trinidade September 2, 2013 at 3:22 pm

Dear Manish,

There used to be a old saying A bird in hand is worth two in the bush . This article is atestimony to this saying . In hand salary is what matters , CTC is a myth to shatter .

Manish , please do a article on food coupons . Its one big sham .

RegardsJoel

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Yea .. True . Will do a story on food coupouns . But I am not sure which point do younot like on food coupouns ?

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8 of 28 31/03/15 2:22 PM

Dear Manish,

There are a lot of thinngs i dont like about food coupons .

1) The very fact that they are in form of coupons . I would have preferred a cardsomething like debitcard. I guess it has started but its still to catch up. Itscumbersome to manage your wallet , the cards , money , coins and thencoupons . Where are I work these coupons need to be exchanged for couponsfrom a local caterer who serves us our lunch. Its too much of a hassle.

2) Secondly I have found that a packet of snacks if bought through cash costabout Rs20/- but if bought via coupons its Rs20/- coupons but Rs2/- in coin . Sobasically it has cost me Rs22/- . Now if i belong to 10% tax bracket, the benefiti get in saving tax on using coupons goes to retailer as additional payment.

3)No wide spread acceptability and if they accept then its with reluctance orafter coercion. The reason being retailers, small time vendors dont like to waitfor there payments. In some cases it takes 45 days.

4)Most of the places where these coupons are accepted are places like KFC ,Mc donalds , subways , pizza joints basically all places that would be classifiedas a nutritionist worst nightmare. Somehow i feel its a way to promote theseforeign made companies and brands at the cost of our health. One more thing tobe noted is that all these places sell exorbitantly priced junk food.

5) There are many more points but i am no mood to type so much .. but i guessif someone where to first hand experience and look at things closely will releasefood coupons are a big pain and sham.

Joel

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Yes, I agree with all these points . But I am sure employers will have theirown viewpoint on this. I mean from business point of view, it might makea lot of sense , and might save them a lot of money, may be through taxpoint of view.

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Thats where your expertise and resources come in Manish. I listed5 points why i dont like food coupons to start with.

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Thanks for listing those . Let me check them !


9 of 28 31/03/15 2:22 PM

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34 Jagan September 12, 2013 at 10:02 pm

I think here one point is missed in using food coupons, i.e., if you try tobuy a snack of Rs 18\- and you have paid a food coupon of Rs 20\- yournot supposed to get a change of Rs 2\-

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35 Rajasekhar September 2, 2013 at 5:11 pm

Let us take a case of Variable pay component being included as part of CTC. I have neverseen a company explaining at what grade they will include variable pay in over all CTC.Suppose appraisal grade ranges from 1 (poor) to 5(Excellant) none of the companies givenso far mentions at what grade they will pay include variable pay. So Inclusion of Variablepay in CTC itself is questionable as it depends on many factors which new joinee willfinally come to know of.And also that appraisal will be donw only at the end of year theycannot include at the time of joining .

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Correct . Which concludes that its mostly a honey trap ! . RIGHT ?

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37 Ashvin September 2, 2013 at 6:18 pm

Yup. Was told me that a performer like you will easily get 25% to 30% of your fixed CTC asVP. Up on joining, could know that there are 20 goals and you need to perform 130% tobecome eligible for 25%. Moreover, there is no measurement how it is 130%?

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Its just a (honey)trap !

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39 Govarthanan September 2, 2013 at 6:26 pm

Hi Manish,

Coincidence! Today I got my offer from an Top Indian IT firm. Luckily I am trapped invariable pay :).. Good article to learn about CTC

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10 of 28 31/03/15 2:22 PM

yea , I know you mean not trapped !

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41 Rohit September 2, 2013 at 6:27 pm

I fell for the 1st point Employer contribution deducted from CTC :-( very shocking when Ireceived my first paycheck.

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Thanks for sharing that .A lot of employees consider it to be unethical , but fromlogical point of view . It looks fine ! . What do you think ?

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43 Rohit September 4, 2013 at 12:54 pm

It is fine as long as it is informed with transparency.. But nothing wasmentioned in the salary structure. Thats why I felt bad and cheated. I evencomplained to HR.. but obviously, nothing happened as this was policy.

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Yea . truely speaking you can do anything about it and should not ,because when you are on the other side of the table, you will suddenlyfeel what a great thing it is :) . All you can do is make yourself awareabout it and choose out of options . !

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45 Govarthanan September 2, 2013 at 6:27 pm

Sorry, I meant to say that I am not trapped in Variable pay

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46 Ratan Tata September 4, 2013 at 6:27 am

TCS?

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47 Kranthi September 2, 2013 at 6:41 pm

Hi,Thanks to Jago Investor. You open our eyes every day on many topics. This article is relatedto Jago Employee kind of. :-). Let me share my experience.


11 of 28 31/03/15 2:22 PM

In my present company, what happened is that they promised Rs.X+VP as CTC onphone/email during negotiations and when they gave the offer letter on paper, they did notmention the variable pay. So, on records you are earning Rs. X only. Every year they arepaying some percentage of VP component (which is 10% of CTC). Can we complain this tosomeone? Is there any organization which regulates this? It is highly unethical.

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Always join once you get every confirmation on writing !

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Thanks for sharing that. Its highly unethical if this has happened . Did you talk tohigher management about it ?

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50 Nikhil September 2, 2013 at 10:50 pm

Really nice article for the someone like me who is new to this CTC world.Working with small company I never really bothered to know more about CTC in detailbecause my take home salary was CTC tax.

Thanks

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Thanks for sharing that :) . As I said , in small companies the CTC is the take homeonly !

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52 Anil September 3, 2013 at 9:23 am

Nice article, I have experienced this too. But in a positive way. I shifted from a companywith over 1lac employees to a small company with 100 employees. The salary hike in paperwas just above 100%. But in my take home salary there is a difference of more than 100%!!!That means my earlier CTC was including so much variable and other components, here itssimple and straight. Only PF and IT is deducted from my salary, nothing else. The pay sliplooks very simple. In the earlier company every month the take home was different (to asmall extend).

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12 of 28 31/03/15 2:22 PM

THanks for sharing that Anil :)

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54 AkMEhta September 3, 2013 at 9:46 am

A article at an apt time. I changed my job 2 months ago.when i got my first salary it included salary of 45 days so i was a bit confused about my takehome. But yesterday i got my 2nd salary and i now know for sure that i have been one of thevictims/fool. Actually my take home has decreased by 80 rs. the reason was i thought theEPF was not to be deducted as you rightly in the first point of this article.Although my EPF has been increased, but its of no use to me as of now and now there isnothing i can do about it apart from playing along. Although getting a 20% hike on packagethe take home is nearly the same. Sad about it but no other option other than accepting thesituation. Yes it was an IT MNC for those who are wondering

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Thanks for sharing your case . I am sure it will be helpful to many freshers !

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56 Ashish September 3, 2013 at 10:07 am

oh there are still understandable. I have seen companies putting cost of rent for the cubiclewhere you sit in their CTCs. Now a rent in nariman pt in mumbai alone jacks up your CTCby 10 12 L per yr.

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57 Karthik Reddy Chintaparthi September 3, 2013 at 10:53 am

I fell for trick 2 while joining Accenture. My next year hike was far less than previous yearCTC.

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Yea . Thats what we are talking about . Thanks for sharing !

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59 Sumanth September 3, 2013 at 11:06 am

Hi,

the article is good to read and lots of inputs. to this i would like to add the cost of relocatingfrom one area of the city to another or from one city to the other.


13 of 28 31/03/15 2:22 PM

one have to also take into consideration of the relocation expenses like rent, cost of living inthe area etc. and then finally calculate what is the real world hike you get an what is the realamount you have in your hand

Real Take home = Take home salary cost incurred because of relocation (likerent,transport etc.)

if you are satisfied with the real take home then u may not regret on your CTC

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True . this is very very important . I have seen people relocating and putting lots ofmoney only to realise they have to relocate again :)

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61 Anjan March 8, 2014 at 5:55 am

I think this is one of the most important points raised here. The Real Take HomeSalary is what matters most and should be the deciding factor when considering a newjob offer. Even a 30-40% salary hike can be nullified because of relocation expenses.

Also, the convenience factor should be given equal importance. If you werepreviously going to office from home and for your new job, you have to shift toanother state and stay in rented accommodation, that 50% hike in salary might notmake any difference.

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62 Manish Chauhan March 12, 2014 at 5:44 pm

True ..

Just one point, even those thing which you dont get in hand matters like EPF orother benefits ! , only you can decide how much they matter to you !

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63 RAMESH September 3, 2013 at 11:59 am

True, but why working with that organisation if you all know about it?

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Its just an awareness article, so that people atleast know how things happen and canbe cautious next time

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14 of 28 31/03/15 2:22 PM

65 Shib September 3, 2013 at 12:04 pm

The bottom line is, the onus of understanding the offer and knowing the details of the CTCis on the employee. Each one of us should be aware of some basic financial details andJagoinvestor is doing a commendable job in educating us. Companies do give a basic idea ofthe take-home when you ask, at-least Ive got all my answers whenever Ive asked. One ofthe company also made me talk to their accounts department to let me know of the details (Iguess the HR didnt have all the details). So employees should ask the details.Another point Id like to add is, your take home would also depend on which tax bracketyou fall in, and your tax-saving investments (or declaration of the same beforehand).

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Yea Shib

Agree with you . Many companies are very open to disclose things .But many are not:) . This was just an awareness article !

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67 Shib September 3, 2013 at 12:27 pm

I guess, when companies are not open to disclose things, one should pick up theWARNING signals there and then :) Something is fishy, be prepared to walk out!!

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68 bharat shah September 3, 2013 at 1:30 pm

though not for me (am retired! and ) , but read after noting more than 50 comments.congratulation for one more educating article, Manish and JI team.

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Thanks Bharat !

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70 PrAvEen September 3, 2013 at 2:27 pm

My other advice is Never trust a IT Recruiter/HR. They are as worst as snake oil salesman

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71 AkMEhta September 3, 2013 at 3:04 pm

its a little disturbing when the on hand take home decreases and hence the article is must


15 of 28 31/03/15 2:22 PM

read for all those who are thinking to change their jobs.

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Thanks for appreciation :)

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Thanks Akmehta !

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74 Mittal Shah September 3, 2013 at 3:39 pm

Yep, this is absolutely true. I am still travelling on the same boat

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Thanks for sharing that Mittal !

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76 Chitra September 3, 2013 at 4:50 pm

As always, an excellent article Manish! In fact, my current employer also offered Hot SkillBonus to the employees with the specific skillsets which went upto 2.5 lac. However duringrecession time, company decided not to share the Hot Skill Bonus for that year and the paytremendously went down for the people who were getting Hot Skill Bonus.

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Thanks for sharing Chitra

Anything which is not fixed and variable can always get removed during recessiontime .

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78 Ruminating Optimist September 3, 2013 at 5:16 pm

Manish, I believe as long as the employer is clearly stating all the components of the CTC inthe offer letter, the use of the term CTC and hence various components used therein is ok.

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16 of 28 31/03/15 2:22 PM


Yes, correct

But there is a need to educate people on this , do you agree to that ?

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80 Ruminating Optimist September 7, 2013 at 10:10 pm

Yes, of course. Am not questioning that at all :) A lot of people do get fooled,and there is a need to correct that.

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81 Wriju Bharadwaj September 3, 2013 at 7:48 pm

Good article .

Due to several factors esp. variable pay components causes confusion as we dont get thesame amount as take home over a period of months. Then when auntji asks, Beta kitnakamate ho , we end up telling CTC because:

a. Its easier than calculating average of monthly take home amounts.b. Its more impressive.

Thanks for sharing Manish

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Haha .. good one !

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83 harsh September 4, 2013 at 1:17 am

well written as always. compelled to comment after a long time.while you have covered almost everything, I would like to suggest you design a calculatorfor users. I had one when I was changing job 4 years ago :)95% of candidates get real hike of 10-15% actually considering taxes and hiddencomponents. also many first time job changers dont realise they are also moving into highertax slab.please be careful before you make a move :)

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Which calculator are you talking about? Can you give me outline for it ?


17 of 28 31/03/15 2:22 PM

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85 Nikhil September 4, 2013 at 11:58 pm

Hi Manish

I also went through all this when I got placed. But my curiosity to explore took me to a landof no surprises when I received my first payslip.

In India almost every company inflates CTC (fortunately mine does only for annual bonusand EPF share and not on insurance and benefits). I have heard some Investment Bankspaying 50 lacs p.a. which is just impossible to digest. But the ground reality is that 40% ofthat is just your floor rent (occupying 66 cubicle around Nariman Point, Mumbai will costyou a lot). Another instance of this is; during campus recruitment in our college a 9.5 CTCand 11.8 CTC (diff of 2.3 = ~20,000 pm) ultimately had only 1500 per month take homedifference :-o

Its better to always ask (or at least confirm) for Gross Salary i.e. (your take home + plusTDS + employee PF contri + prof tax). This is directly related to the employee and gives afair idea of how much youll take home. And it should not be a matter of shame orreluctance for someone (usually a fresher) to ask such questions. During my hiring season;80% of Q&A were related to compensation :)

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Nice :) . Thanks for sharing that Nikhil

Pretty much story of every person :) .

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Till the time i have written this comment , there are 70 post above me including replies.After going through them I am asking myself Can i safely conclude that inflated packagesis more wide spread in the IT field then others ?

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Yes, I would say IT sector is one , another is management or sales ! (MBA)

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During my Fathers and grand fathers generations , employees in organizationswere happy and content. Then somewhere came MBA and things changed foremployees.


18 of 28 31/03/15 2:22 PM

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Yea ..

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91 Rajesh September 6, 2013 at 12:38 pm

Dont just look at the CTC and Take home salary.

At one stage of your career, Higher the take home = higher the tax burden. Remember youcan only invest 1lac through 80C + Home loan exempt.

The key here is the Basic Salary. Every component revolve round it.Negotiate your new employer for a higher Basic salary and keep the variable percentage lowif possible. It will increase your HRA component, Both your and employers PF contribution,Gratuity, LTA and Leave encashment. Dont get worried that you are contributing more toPF and Gratuity (There is no better way of investment and you get it back eventually).

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Yes, your right that we get the PF and Gratuity(conditionally) back, and related to PFit is tax free when we get it back

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93 Snehal Sukhadia September 9, 2013 at 7:11 pm

Manish,

Very nice article on the tricks played by most of the companies. This reminds me of the firstplacement where it took almost a day for me to understand the complex salary structure.Even then I became a victim of this CTC thing. However during my next job I made sure toinquire about the take home salary.

During my campus placement days, I had few of my friends who were offered a CTC of 12lacs p.a. while others were just offered 9 lacs p.a. But eventually when they calculated thetake home salary, there was a marginal difference in both of them. This was because thecompany offering a CTC of 12 lacs had included an interest free loan of Rs 2.5 lacs.

Thanks for writing this story!

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2.5 Interest free loan , super idea . I am sure some MBA guy in the recruitingcompany must have come up with this idea and I am also sure that this placement was


19 of 28 31/03/15 2:22 PM

in some MBA college.

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Thanks for sharing that :) . 2.5 lacs of interest free loan in CTC ! . Good one !

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96 Sunil Kumar September 10, 2013 at 6:27 pm

Hello Manish,

I am also worked at ltd company, I know my employer deduct epf from my salary but theydont tell me my epf account no. and also get me salary by hand. How I know my epf detailsplease tell me.

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This is just wrong . An employer has to tell you your EPF number, it has to be thereon your salary slip . You can file a RTI application to find out if they are depositingyour EPF to EPFO or not !

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98 nitin bourai September 11, 2013 at 10:47 am

one of my friend got 20% hike and a bonus component is added to his CTC, and thisreduced his take home salarythis bonus is provided every 3 monthsif employee leaves early ,company shows him the aggrement and policy , this and thatin the end a loss for employee.

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Its just a trap :)

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Most of the companies play the same strategy by showing the CTC to the employee, early ofmy career, I use to hear that few companies use to add rent of the area in which an employeehas to sit in CTC, if the companies has taken any building as lease/rent.

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20 of 28 31/03/15 2:22 PM


Yea .. many did that, many do that !

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102 Bharat September 13, 2013 at 2:25 pm

Hi Manish,

I read similar article in NDTV today and here is the link. profit.ndtv.com/news/your-money/article-5-hidden-facts-about-ctc-your-employer-wont-tell-327114?pfrom=home-otherstories.

I cant believe how the author came up with exactly similar points as you. I wonder if theauthor read your article several times before coming up with his own version.

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Yes, I know about this . I reminded about this to author , He said Its a coincidence :) .

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104 Rohit Sasikumar September 13, 2013 at 2:40 pm

Same goes for Persistent Systems as well :). Almost all the tricks are meticulously played.

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Thanks for sharing :)

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106 Ravi September 13, 2013 at 5:23 pm

So the creme dela creme of Indias children should also be taught how to read a CTC !!

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True !

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108 Ashwin September 13, 2013 at 5:50 pm

Guys seems this article has a secret admirer :) http://profit.ndtv.com/news/your-money/article-5-hidden-facts-about-ctc-your-employer-wont-tell-327114?pfrom=home-


21 of 28 31/03/15 2:22 PM

otherstories

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Yes Ashwin

I am aware of the content theft which has happened. I am on mails with these guyswho copies it ! . Would you be able to comment on that article that it was originallytaken from jagoinvestor and you are a regular reader ?

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110 Ashwin September 13, 2013 at 8:19 pm

Done, Manish..its awaiting moderation, lets see how fast they let it get posted:)

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sure !

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112 Suresh @ Best Investment Options September 14, 2013 at 9:52 pm

Well explained Manish. This is how employers fool employees. If such awareness is there, Ifeel employees would be aware and such tricks can be known upfront.

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Thanks

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114 Shan September 29, 2013 at 1:30 pm

Will there ever be an End to CTC. Hope some Court in india give direction on thecomponents to be included in CTC. The best part is All the MNC have a Strict Code ofConduct rule not to share & Compare the CTC Details with fellow person (or) Any one,And many people follow this rule like Bible Employee Contribution in EPF is taken forIncome Tax rebate and Company Contribution to EPF which is included in CTC is not takenfor Computation into Employee Income Tax rebate. If we ask for the explanation aboutwhere that money goes on Computation there will be no answer from any CompaniesInternal Dept. By doing this Many employee feel it as a Waste instrument to contributeinstead they can contribute the same amount to PPF atleast they need not have worry oncethey Change job. Also if the EPF is with Trust, There are other charges included as


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Maintenance , Processing, etc..

It would be nice if Govt can Bring in a policy where EPF can be transferred to PPF everymonth. Because at the end its our money and we need to have the flexibility of how & whereit has to be placed. Apart from that Companies Deduct Professional Tax irrespective oflocation. According to Law only employees who work in Metro Cities Professional tax to bededucted. Also Professional tax is applicable who are not permanent employee andemployed as Consultant who carry special skillset. All MNC give offer letter projecting it asPermanent employment but they are actually a Mere Consultant. In case if they shut shopand if you ask for your Due share of settlement and speak in terms of Law they bargain withyou stating that there would be a Negative feedback once you get into another job onbackground verification if you speak Law and escalate this issue. Lehman Brothersemployees in india know this better.

Also once the employee is send Onsite per Diam comes into picture. Per diam information isnot shared on CTC nor on Appraisal letters. In many cases employee is asked to quit theindian company and accept the offer given by its foreign subsidy.But as per law if Per diamis given Employer should provide Food, Transportation & Accommodation. But theEmployer states that you are getting Per Diam and you need to take care of all your expense.Some companies even charge Flight ticket, Visa Fee , Processing fee for visa, InitialAccommodation, Food, Laundry etc.. these are not included in Offer letter and there is noDirections available with any one.

There is a Very Big Scam in making by the MNC by the name of CTC Govt is silent as theyget more money in term of Tax. No one is Bothered about Employees and no one isinterested to be transparent. Will there be a End to all this is a Question to answer

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Thanks for sharing your detailed thoughts about this topic . I am sure there is a lot ofclarity needed from EPFO front on this !

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116 Shan September 30, 2013 at 10:24 am

Clarity needed on the following :

1. EPF with Govt / Trust & Charges involved on the same.2. Professional tax Deduction Eligibility Criteria3. Gratuity & Pension fund need to be returned if Employee quit before 5 Yrs. As Manyinclude this also into CTC Component.4. Even Per Diam For all Onsite Employee & Benefits as per Govt Rule for employees asper Law. In US if a person is suppose to travel by Flight above 7 Hrs Company need toProvide only Executive Class Travel & Star Hotel Accomdation.5. Computation & Tax Implication on Indian Salary if a Employee goes Onsite. And receivePer Diam6. Calculation & Continuation of Gratuity in case Employee asked to quit indian entity &join its Foreign Entity.


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7. In case of PF withdrawal Maximum number of days Employee can wait before Suing thecompany for its failure.8. Clear & Standard set of Documents required for withdrawal of PF if employee quits.9. If Pension & Gratuity fund is included in CTC how its going to be settled.10. Clarity in Income Tax rebate on Company contribution if its included in CTC.11. As EPF is launching the option to check the status of contribution Online. How canemployee know the EPF fund if parked in Trust.12. Tax Implication on EPF if withdrawn before the the age of 60.13. On Variable Pay if Employee Performance is 100% and due to bad decision byManagement company performance is only 5% how the Variable pay would be calculated.14. Along with CTC Gross Take home & Nett Take home should be Clear if divided by 12should be able to arrive at a Fixed figure excluding Tax.15. How Employee Leaves would be calculated. Will it be only the Basic be paid (or) theTotal Gross will be computed. If employee have 3o days of Leave balance at the time hequit the company how much money he can expect 30 day Gross salary (or) 30 Day BasicSalary.16. If Employee quit in middle of Financial year from the company after giving 100% hehave contributed to the Company he is eligible for his share of Variable payout during histenure as its included in CTC. Does he have right to claim the same.17. Govt have stated the rule that Bond is illegal but many companies still put up a Bond onFreshers that they should not quit the company before bond expires. They also send a CourtNotice if the person abscond the company and many people pay the Penalty amount to thosecompanies How to stop this and whom to approach to get the company punished for suchact.18. How can the employee know the TDS detucted from his salary have reached Govt taxdept every month there is no Mechanism to track. In this way Company can Fool around onthe Deduction and avoid paying the Tax.19. In case the PF is with Trust what Benefits Employee can avail extra like Lower intereston Loan against PF, Higher Interest rate on PF, Etc.. If Employee get the same benefit asEPF by govt he should be given an option to choose where he want to keep the accountEither with Govt EPF (or) Company PF Trust.20. Whom & where to approach in case if the company does all the above. Is There Singlewindow for employee grevience.

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117 Manish Chauhan October 7, 2013 at 8:47 am

I suggest you open a thread on forum to ask these , and better create different threadsto ask each point. Its tough to get anyone answer such a long query http://www.jagoinvestor.com/forum/

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118 Guest November 4, 2013 at 11:35 am

It seems Accenture is very clever in getting things done in a very highly cost effective way!!!

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24 of 28 31/03/15 2:22 PM

119 Nish May 29, 2014 at 2:33 am

And you call this a trick since none of these costs are actually a cost of the company right? Imean, some one else is paying for their bonus, EPF, stocks, right?

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120 Manish Chauhan May 29, 2014 at 9:51 am

I didnt get your comment Nish ? Who pays for those ?

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121 Nish May 29, 2014 at 5:09 pm

I was trying to be cynical. I wouldnt call adding these figures to CTC as a trick,or false inflation. Bonus and EPF are a cost to the company, and they end up inthe employees pocket, sooner or later.

Theres a reason its called CTC Cost to Company, and not IYP In YourPocket.

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122 S.Das August 25, 2014 at 4:30 pm

I am victim of shifting from a small company to big brand. They offered me mere hike dueto their brand. Only one line written as Performance Linked Incentive (PLI) component inApt.Letter. I was totally clueless about it and came to know only during increment time.They cut 50% as my performance was good. 60% of increment was added to PLI and againit will be chopped off in next year. So, only 1000 incremetn p.m. Salary is remaining almostsame in 3 years. They only offer big designation so that you have to accept lowerdesignation at another company.

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Thanks for sharing that :)

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124 Soaham Parashtekar August 27, 2014 at 7:12 pm

I am not sure I can call it tricking the candidates The principle of Caveat Emptorapplies to all the transactions. If you are the one buying something, or in this case asking /applying for something; it is as much your responsibility to get your facts right.

Technically, a company writing everything it spends on you as a Cost to Company is notwrong at all. It is in fact the cost borne by the company while you work there, making use oftheir premisesExample:My organization recently gave me the privilege to work from home. Now, my


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laptop and monitors are plugged into the wall unit for 9+ hrs a day, 5 days a week hascaused my monthly electricity bill to jump from 800+ to 2000+. When I work at my office,the electricity costs are borne by the company. Same goes with Internet usage, or telephoneusage.

While the other options like One Time Bonus or Stock Options dont seem to provideinstant money in hand, or periodic income like Salary; at the end of the day, it is stillsomething the company is spending on you and so it can be part of the CTC.

And the same goes with EPF as well the company is making contribution on your behalf.If you leave the company, that money is not kept by your company. It is yours to withdrawor transfer. So it is a legitimate cost to company. Just because it does not translate intomoney in hand every month does not mean it is not a cost for the company.

Finally, every company adds different components to CTC. It is the responsibility of thecandidate to check what is the Fixed component and whats the Variable component in thesalary. You can ask in the interview and the person can highlight the fixed components andvariable/one-time components.If you feel the Performance-linked component is very high (Id call my CTC unacceptable ifmore than 20% of it is performance-linked component), feel free to discuss, negotiate, or atleast understand how the performance is judged. If it is subject to your managers ratingsalone, you have little to count on that money!

However, if you are saying that you saw something written clearly as one-time bonus, orstock options and still went ahead and divided those amounts by 12 to secure your placeon Cloud nine, I am not sure if you should really call yourself an employable candidate!!!

Finally, as you grow in terms of your position in the company, your pay becomes less fixedand more performance-linked. I work with Hewlett-Packard. My CEO, Meg took $1 as herANNUAL salary for a couple of years since she joined HP as she was determined to turnaround the company. However, that does not mean HP did not incur any other costs, or payher based on her performance. Heres a breakup of what she actually received in 2013 $260,000 Incentive Pay$4,300,000 Stock$12,700,000 Stock Options$275,300 Perks (including personal use of corporate aircraft valued at more than$250,000)

As you can see, Meg using company aircraft for her personal use was also considered partof what HP paid to her And you can see that the whole of her compensation (more or less)is completely performance-linked. Her stocks and options are not worth much if she cannotget the company to perform better, which would get the stick price to go up, thus making hera handsome profit!

So why not get used to Performance-linked money from now on, and strive to earn as muchas you can Understand that everyone at your level would have more or less the similarpackage and that would mean if your performance is stellar, you get to have a lions share ofthe PLI component while your colleagues get less!!!

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26 of 28 31/03/15 2:22 PM


Thanks for sharing your views on this topic

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126 Soaham Parashtekar August 27, 2014 at 7:28 pm

Forgot to add the link for Megs compensation the data was taken from one of thewebsites in the public domain http://www.usatoday.com/story/money/2014/02/03/hp-ceo-meg-whitmans-pay-package/5181305/

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127 ali November 19, 2014 at 5:07 pm

Hi All,

I am currently having an offer of 11 lakh CTC out of which 9.13 lakh is fixed and 1.87 Lakhis variable performance pay.

Hr claims almost 90% variable pay is paid to employee even for an average performance.(paid in 2 parts- every 6 moths)- Pro rata basis.

i could see 20% hike on direct component and overall 46% hike on CTC.

Can you please guide me is this good hike ??

by the way , i currenlty working with good mechanical company, and the new company isone of top 4 japanese MNCs (mechanical)

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128 Manish Chauhan November 21, 2014 at 10:09 am

I think thats its good enough .. Over a long term, a yearly hike of 7-8% is abenchmark . So you are going well !

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129 ali November 19, 2014 at 5:09 pm

I forgot to mention that, my current CTC is 7.6 Lakhsin which there is no variablecomponent. its all fixed component.

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130 Ramya February 25, 2015 at 5:26 pm

Hi I am ramya and i recently got an offer from mindtree for C3 position (Module lead).I need to know how to calculate Take home from Mindtrees compensation Structure.


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BASICFEPPFGratuityInsurance benefitsEmergency Medical FundAnnual GrossPerformance bonus

These are the components available in my Offer letter and I am confused how to calculatethe Take Home from this. I came to know that the take home is lesser in Mindtree whilesince I have a 3 year gap in my career iam bound to accept this offer. Pls help ASAP.

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131 Manish Chauhan March 8, 2015 at 7:17 pm

Hi Ramya

The question asked by you is beyond our scope. Its suggested that you hire an experton the issue and pay them for the advice.

Manish

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28 of 28 31/03/15 2:22 PM

5 Tricks Played by Employers to Fool You With High CTC (Cost to Company) Salary

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