An annual salary of Rs 30 lakh sounds fantastic, doesn’t it? Come placement time at top business schools and such astronomical salaries seem the norm. Average salaries are quoted in seven figures and the highest pay package is worth a crore. All this attracts students in droves to pursue management courses, their belief cemented by the fact that the money they invest in fees will be recouped in a couple of years. So why does it take most of them longer to repay the education loan? Simply because the actual salaries they take home are much less than those quoted to them.
Dushan Kapoor (name changed) was offered the post of an HR executive at an annual salary of Rs 2.75 lakh. He expected his take-home pay to be about Rs 20,000 after deducting tax and the Provident Fund contribution. However, his happiness was shortlived when he saw the salary break-up a few days later. “The company had included accommodation, telephone reimbursement and meal coupons in the package, which reduced my take-home pay to Rs 15,000 a month,” he says.
The salary you actually take home
Don’t be envious if you know someone who quotes his cost-to-company (CTC) as Rs 1 lakh a month. In all probability, he’s pocketing only Rs 70,000 (see Decoding your first salary slip). “ CTC is an expected income, but how much you get is subjective and is known at the end of the year. This is because a large chunk is the performance-linked bonus,” says Sunil Goel, CEO, Global Hunt, a headhunting firm.“The bonus usually comprises 10-20% of the CTC, but what you get in hand is 65-75% of the figure that was quoted,” says Kris Lakshmikanth, managing director at HR consultancy firm, The Headhunters India .
Delhi-based Kamal Singh (name changed) has recently got an offer of Rs 7.5 lakh a year through campus placement. “My annual variable pay is Rs 1.5 lakh,” she says. But does she have any clue about her take-home salary? “I am not very sure of that. I think there will be a tax outgo, but I don’t know if there are other deductions,” she admits.
Singh should check with her prospective employer as various factors included in the CTC are not given in monetary form. For instance, employers may provide health and life insurance covers to employees and show the premiums paid by them as a part of your total salary. Other factors that bloat your CTC are the expenses incurred on training you, subsidised meals provided in the cafeteria, transport facility, etc.
In the case of international job offers, there are other issues that you may have to deal with. Delhi-based Bhaskar Khanna got an offer of 50,000 dirham from a Dubai-based company, but he rejected it. “Initially, the offer seemed attractive, but when I enquired about the cost of living there, I found that the rental and transportation costs were too high. I would have barely managed to save anything,” says Kapoor. An international offer should also be evaluated in terms of the economic conditions and tax structure in that country.
What you may get if you stick around
Funds under some category heads can be availed of after a certain period of time. These include gratuity and retention bonus. The 4.81% contribution made towards gratuity is often included in the CTC, but you will only get it if you work with the same employer for at least five years. The retention bonus can sometimes be as high as 15% of the CTC. However, it is paid only after 2-3 years of working with the company.
Your Provident Fund amount is the only payment that is guaranteed no matter how many years you work or with whom. While a 12% deduction from your basic salary towards Provident Fund is mandatory, companies have begun including the matching contribution to be made by them as a part of the CTC.
[Source]
Dushan Kapoor (name changed) was offered the post of an HR executive at an annual salary of Rs 2.75 lakh. He expected his take-home pay to be about Rs 20,000 after deducting tax and the Provident Fund contribution. However, his happiness was shortlived when he saw the salary break-up a few days later. “The company had included accommodation, telephone reimbursement and meal coupons in the package, which reduced my take-home pay to Rs 15,000 a month,” he says.
The salary you actually take home
Don’t be envious if you know someone who quotes his cost-to-company (CTC) as Rs 1 lakh a month. In all probability, he’s pocketing only Rs 70,000 (see Decoding your first salary slip). “ CTC is an expected income, but how much you get is subjective and is known at the end of the year. This is because a large chunk is the performance-linked bonus,” says Sunil Goel, CEO, Global Hunt, a headhunting firm.“The bonus usually comprises 10-20% of the CTC, but what you get in hand is 65-75% of the figure that was quoted,” says Kris Lakshmikanth, managing director at HR consultancy firm, The Headhunters India .
Delhi-based Kamal Singh (name changed) has recently got an offer of Rs 7.5 lakh a year through campus placement. “My annual variable pay is Rs 1.5 lakh,” she says. But does she have any clue about her take-home salary? “I am not very sure of that. I think there will be a tax outgo, but I don’t know if there are other deductions,” she admits.
Singh should check with her prospective employer as various factors included in the CTC are not given in monetary form. For instance, employers may provide health and life insurance covers to employees and show the premiums paid by them as a part of your total salary. Other factors that bloat your CTC are the expenses incurred on training you, subsidised meals provided in the cafeteria, transport facility, etc.
In the case of international job offers, there are other issues that you may have to deal with. Delhi-based Bhaskar Khanna got an offer of 50,000 dirham from a Dubai-based company, but he rejected it. “Initially, the offer seemed attractive, but when I enquired about the cost of living there, I found that the rental and transportation costs were too high. I would have barely managed to save anything,” says Kapoor. An international offer should also be evaluated in terms of the economic conditions and tax structure in that country.
What you may get if you stick around
Funds under some category heads can be availed of after a certain period of time. These include gratuity and retention bonus. The 4.81% contribution made towards gratuity is often included in the CTC, but you will only get it if you work with the same employer for at least five years. The retention bonus can sometimes be as high as 15% of the CTC. However, it is paid only after 2-3 years of working with the company.
Your Provident Fund amount is the only payment that is guaranteed no matter how many years you work or with whom. While a 12% deduction from your basic salary towards Provident Fund is mandatory, companies have begun including the matching contribution to be made by them as a part of the CTC.
[Source]
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