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

5 tricks played by Employers to fool you with high CTC (Cost...
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5 tricks played by Employers to fool you with

high CTC (Cost to Company) Salary
by Manish Chauhan 131 comments
It was campus placement month, and although everyone declared that they wanted to do quality
work 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 by
companies, 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 to
have cracked it. However the average students and other not so lucky ones had to settle for
lower pay packages.
The Very Happy and Only Happy students left for the next phase of their life. The bitter truth
however, only emerged after a year or two that the take home salary of most of the students was
not that different from the rest. While the students who got high packages were obviously earning
more than the others, the difference was only marginal.
The CTC (Cost To Company) numbers had fooled us!
CTC vs Take Home salary
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What is CTC (Cost to Company)

What was happening was that the companies were exploiting our human craving for Instant
Gratification. Job Seekers want big salary numbers its a benchmark which they use to compare
themselves with others. It feels nice to say, my package is 12 lakhs per annum, even if you only
get 58,000 per month in hand.
CTC or cost to company is what a company spends on you. If something is an Expense for a
company because of you, its part of your CTC, as simple as that. So starting from the air
conditioning you use at office, to the food you eat at office, everything can be part of CTC. Here is
one 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 at
inflating its VP compoment). Its been only 3 months now since I joined this company and the
worst part is that the take home I get now is almost same as that I was getting in my earlier
company (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 employees

There are several ways companies can inflate the CTC Numbers and give you an impression that
you are getting the best deal, only for you to realize later that the other job was better. Let me now
show 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 was
deducting the employers share of EPF from my salary. I was wondering If its the employers
share why are they deducting it from my salary? It was only later that I realized that this was
merely a simple trick to inflate the CTC. They could have just reduced my CTC by an amount
equal to employer share of EPF and could have paid it separately, but then my CTC would be
lower 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 amongst
the highest packages on campus. But then my salary in hand correlated poorly with the CTC
figure. In my mind, I had divided my CTC by 12 on the day of placement and was on the top of
world. 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 number
substantially. 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 Options
again are not a regular payment source, however they do increase the CTC considerably. You can
learn 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 payments
made by the company towards yearly life insurance and medical insurance. The thing is, you do
2 of 28
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not get these things as CASH, but instead as benefits. However, the company adds all these to your
CTC 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 performance
based) is to add a considerable amount of variable component to the salary and keep the fixed part
small. The CTC number is then provided based on an average performance assumption. For
example if your CTC was Rupees 10 lakhs, it could happen that 4 lakhs of the CTC would be
FIXED and the remaining 6 lakhs would be variable. The part of the variable component
ultimately paid to you could go down or up depending on your performance or some parameter
that supposedly would be under your control. It could be sales, the number of clients you bring in
etc. etc.
Start-ups vs Giant MNC companies Difference in Salary Structure

In my limited experience, pay packages offered by startups or smaller companies are more or less
transparent, and artificial increases in CTC are limited. Dividing the CTC figure offered by them
into a monthly number will get you very near to your take home salary though it will obviously
be lower. However, in the case of larger companies, the CTC number is inordinately inflated and
your eventual take home salary might give you the feeling Seems like there is some mistake in
the calculation.
Joining other company for higher Salary ?
Just because you are getting a higher package in some other company, does not automatically
mean that your take home salary will increase by the same margin. It may happen that your take
home salary increases by very little, or in the worst case scenario, stays exactly where it was. What
you should focus on, while moving to another job, is the additional increment in your take home
component 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 CTC
numbers.
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!
Reply
2 Manish Chauhan September 3, 2013 at 2:01 pm
Thanks for sharing . can you explain your case ?
Reply
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 they
had 18% of fix pay as variable pay. But however in the first year they hardly paid me 2% of
that.
thanks,
RP
Reply
4 SameSaga September 2, 2013 at 11:15 am
Its Accenture
Reply
5 RP September 2, 2013 at 12:05 pm
Yes. Its Accenture.. :)
Reply
6 abhisheka September 2, 2013 at 2:44 pm
Thats very helpful comment for me! If got any opportunity there :)
Reply
7 RP September 2, 2013 at 3:06 pm
Before accepting the offer ensure that you get your desired fix pay.
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Reply
8 RK September 2, 2013 at 11:21 am
I guess its Accenture which is having higher VP and lower Payout at year end..
Reply
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 that
much hike to accept your offer.
You must do a salary negotiations based on Take home salary . not on CTC.
Reply
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 the
company..so all the component which has been mentioned in article is called part of CTC
only.Can not be counted seprately. In simple waycost paid by company for one
particular employee..All the components are some how given to employee only. I
would rather sayThe way employee look at this CTC is wrongCTC is never meant for
Employee Employee should focus on or ask about what is take home salary to HR..this
is right and important point to know about their salarythen they should compare it with
salary they were getting.
Reply
11 Sathya Thambusamy September 2, 2013 at 11:52 am
I agree with Amit, only when these are not properly disclosed would they become
unethical. When they are disclosed they all contribute to some benefit enjoyed by
employee.
Reply
12 cbrcoder September 2, 2013 at 2:43 pm
By that logic, they should also mention the electricity used by employee while at
work, the water and rent charges per employee etc! Cost to Company makes no sense.
You cant compare CTC
Reply
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 electricity
etc as no matter if this employee joins or not, operating expenses will continue
to occur. I agree, employee should be more cautious to review take home pay
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before joining.
Reply
14 NAGAMOHAN M September 2, 2013 at 11:55 am
Some Companies even consider Gratuity(Which is payable 5 years from the date of
joining),Super Annuation, EL Encashments as part of their CTC,Which makes the ctc figure
looks big.But it is very clearly mentioned as Cost to Company not as Cost to Individual so
we should have to work at take home pay and decide accordingly.I dont find any fault with
the Employers,It is our duty to study the CTC structure in complete.
Reply
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 sees
from this perspective, company is right to include all the points mentioned.
If this distinction is understood, there will be less confusion.
Reply
Yes. The article aims at that only .
Reply
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 equally
good at inflating its VP compoment). Its been only 3 months now since I joined this
company and the worst part is that the take home I get now is almost same as that I was
getting in my earlier company (though on paper the CTC is having 35% hike over the
previous company CTC) :(
Reply
thanks for sharing your case Nandan . I added it to original article ! , Thanks for
contribution !
Reply
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.
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31/03/15 2:22 PM
Thanks Manish
Reply
thanks
Reply
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 :-).
Reply
Yea .. This is what they have to focus on !
Reply
23 Maulik September 2, 2013 at 3:17 pm
I disagree with this article. This article is confusing and not educating. By excluding all the
components you are ingnoring the benefits you get out of it. Just an example lets say
medical insurance in provided by Company A to entire family including dependent
parents and other Company B providing same insurance but only to the employee. In this
case naturally the terms of Company A are more favourable than B assuming everything
else same. One should not see only take home but see various aspects involved. While I
understand that variable part should be also calculated with the pinch of the salt and
Employee has to be more diligent in considering that.
Reply
24 Robin September 2, 2013 at 8:30 pm
Manish isnt calling it unethical. Someone who understands the break ups will not
complain about the CTC concept. But most learn slowly and the hard way. A lot of
things are not understood when fresh out of college. Companies will increase
components in the CTC to get better hiring slots in campuses. While I agree that
certain pieces dont convert to in hand but do add to savings or benefits a good
thing I would say. But there are some annoying tricks as well. In my case CTC was
bumped up by 1.5 lacs ( in 2007 ) as relocation package, Sad part was I could get only
what I could use. Since this was one time, next year the CTC went down, bizarre.
Manish reminds me of our place cell days :)
Reply
25 Manish Chauhan September 3, 2013 at 10:51 am
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Yes. A lot of things dont covert, but helps like EPF, Trasportation, good
coupons etc . So On a second look I can see that there is Good component and
then there is Bad component . Bad component in CTC is something which one
cant use all the time and is one time , like Bonus , RSU etc.
Reply
Maulik
All the article is doing and showing people how things happen . A lot of freshers are
not aware that CTC is not salary . You can say that they should know the basic things
like these, but thats what the article is doing.
However, I agree with you that the article should have also mentioned that a lot of
things which are not in hand, are extremely beneficial to employees, but the main
point of the article was that CTC can be very desceptive at times. What do you think ?
Reply
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 confused
with CTC and assume they have got that much salary. See benefits and take home pay
as separate entities before accepting an offer.
Reply
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 a
testimony 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 .
Regards
Joel
Reply
Yea .. True . Will do a story on food coupouns . But I am not sure which point do you
not like on food coupouns ?
Reply
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 card
something like debitcard. I guess it has started but its still to catch up. Its
cumbersome to manage your wallet , the cards , money , coins and then
coupons . Where are I work these coupons need to be exchanged for coupons
from 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 cost
about Rs20/- but if bought via coupons its Rs20/- coupons but Rs2/- in coin . So
basically it has cost me Rs22/- . Now if i belong to 10% tax bracket, the benefit
i 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 or
after coercion. The reason being retailers, small time vendors dont like to wait
for 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 classified
as a nutritionist worst nightmare. Somehow i feel its a way to promote these
foreign made companies and brands at the cost of our health. One more thing to
be 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 guess
if someone where to first hand experience and look at things closely will release
food coupons are a big pain and sham.
Joel
Reply
Yes, I agree with all these points . But I am sure employers will have their
own viewpoint on this. I mean from business point of view, it might make
a lot of sense , and might save them a lot of money, may be through tax
point of view.
Reply
Thats where your expertise and resources come in Manish. I listed
5 points why i dont like food coupons to start with.
Reply
Thanks for listing those . Let me check them !
9 of 28
31/03/15 2:22 PM
Reply
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 to
buy a snack of Rs 18\- and you have paid a food coupon of Rs 20\- your
not supposed to get a change of Rs 2\Reply
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 never
seen 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 given
so far mentions at what grade they will pay include variable pay. So Inclusion of Variable
pay in CTC itself is questionable as it depends on many factors which new joinee will
finally come to know of.And also that appraisal will be donw only at the end of year they
cannot include at the time of joining .
Reply
Correct . Which concludes that its mostly a honey trap ! . RIGHT ?
Reply
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 as
VP. Up on joining, could know that there are 20 goals and you need to perform 130% to
become eligible for 25%. Moreover, there is no measurement how it is 130%?
Reply
Its just a (honey)trap !
Reply
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 in
variable pay :).. Good article to learn about CTC
Reply
10 of 28
31/03/15 2:22 PM
yea , I know you mean not trapped !

Reply
41 Rohit September 2, 2013 at 6:27 pm
I fell for the 1st point Employer contribution deducted from CTC :-( very shocking when I
received my first paycheck.
Reply
Thanks for sharing that .A lot of employees consider it to be unethical , but from
logical point of view . It looks fine ! . What do you think ?
Reply
43 Rohit September 4, 2013 at 12:54 pm
It is fine as long as it is informed with transparency.. But nothing was
mentioned in the salary structure. Thats why I felt bad and cheated. I even
complained to HR.. but obviously, nothing happened as this was policy.
Reply
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 suddenly
feel what a great thing it is :) . All you can do is make yourself aware
about it and choose out of options . !
Reply
45 Govarthanan September 2, 2013 at 6:27 pm
Sorry, I meant to say that I am not trapped in Variable pay
Reply
46 Ratan Tata September 4, 2013 at 6:27 am
TCS?
Reply
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 related
to Jago Employee kind of. :-). Let me share my experience.
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31/03/15 2:22 PM
In my present company, what happened is that they promised Rs.X+VP as CTC on

phone/email during negotiations and when they gave the offer letter on paper, they did not
mention the variable pay. So, on records you are earning Rs. X only. Every year they are
paying some percentage of VP component (which is 10% of CTC). Can we complain this to
someone? Is there any organization which regulates this? It is highly unethical.
Reply
Always join once you get every confirmation on writing !
Reply
Thanks for sharing that. Its highly unethical if this has happened . Did you talk to
higher management about it ?
Reply
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 detail
because my take home salary was CTC tax.
Thanks
Reply
Thanks for sharing that :) . As I said , in small companies the CTC is the take home
only !
Reply
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 company
with over 1lac employees to a small company with 100 employees. The salary hike in paper
was 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 its
simple and straight. Only PF and IT is deducted from my salary, nothing else. The pay slip
looks very simple. In the earlier company every month the take home was different (to a
small extend).
Reply
12 of 28
31/03/15 2:22 PM
THanks for sharing that Anil :)

Reply
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 take
home. But yesterday i got my 2nd salary and i now know for sure that i have been one of the
victims/fool. Actually my take home has decreased by 80 rs. the reason was i thought the
EPF 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 is
nothing i can do about it apart from playing along. Although getting a 20% hike on package
the take home is nearly the same. Sad about it but no other option other than accepting the
situation. Yes it was an IT MNC for those who are wondering
Reply
Thanks for sharing your case . I am sure it will be helpful to many freshers !
Reply
56 Ashish September 3, 2013 at 10:07 am
oh there are still understandable. I have seen companies putting cost of rent for the cubicle
where you sit in their CTCs. Now a rent in nariman pt in mumbai alone jacks up your CTC
by 10 12 L per yr.
Reply
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 year
CTC.
Reply
Yea . Thats what we are talking about . Thanks for sharing !
Reply
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 relocating
from one area of the city to another or from one city to the other.
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31/03/15 2:22 PM
one have to also take into consideration of the relocation expenses like rent, cost of living in
the area etc. and then finally calculate what is the real world hike you get an what is the real
amount you have in your hand
Real Take home = Take home salary cost incurred because of relocation (like
rent,transport etc.)
if you are satisfied with the real take home then u may not regret on your CTC
Reply
True . this is very very important . I have seen people relocating and putting lots of
money only to realise they have to relocate again :)
Reply
61 Anjan March 8, 2014 at 5:55 am
I think this is one of the most important points raised here. The Real Take Home
Salary is what matters most and should be the deciding factor when considering a new
job 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 were
previously going to office from home and for your new job, you have to shift to
another state and stay in rented accommodation, that 50% hike in salary might not
make any difference.
Reply
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 or
other benefits ! , only you can decide how much they matter to you !
Reply
63 RAMESH September 3, 2013 at 11:59 am
True, but why working with that organisation if you all know about it?
Reply
Its just an awareness article, so that people atleast know how things happen and can
be cautious next time
Reply
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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 CTC
is on the employee. Each one of us should be aware of some basic financial details and
Jagoinvestor is doing a commendable job in educating us. Companies do give a basic idea of
the take-home when you ask, at-least Ive got all my answers whenever Ive asked. One of
the company also made me talk to their accounts department to let me know of the details (I
guess 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 bracket
you fall in, and your tax-saving investments (or declaration of the same beforehand).
Reply
Yea Shib
Agree with you . Many companies are very open to disclose things .But many are not
:) . This was just an awareness article !
Reply
67 Shib September 3, 2013 at 12:27 pm
I guess, when companies are not open to disclose things, one should pick up the
WARNING signals there and then :) Something is fishy, be prepared to walk out
!!
Reply
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.
Reply
Thanks Bharat !
Reply
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
Reply
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
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31/03/15 2:22 PM
read for all those who are thinking to change their jobs.
Reply
Thanks for appreciation :)
Reply
Thanks Akmehta !
Reply
74 Mittal Shah September 3, 2013 at 3:39 pm
Yep, this is absolutely true. I am still travelling on the same boat
Reply
Thanks for sharing that Mittal !
Reply
76 Chitra September 3, 2013 at 4:50 pm
As always, an excellent article Manish! In fact, my current employer also offered Hot Skill
Bonus to the employees with the specific skillsets which went upto 2.5 lac. However during
recession time, company decided not to share the Hot Skill Bonus for that year and the pay
tremendously went down for the people who were getting Hot Skill Bonus.
Reply
Thanks for sharing Chitra
Anything which is not fixed and variable can always get removed during recession
time .
Reply
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 in
the offer letter, the use of the term CTC and hence various components used therein is ok.
Reply
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31/03/15 2:22 PM

Yes, correct
But there is a need to educate people on this , do you agree to that ?
Reply
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.
Reply
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 the
same amount as take home over a period of months. Then when auntji asks, Beta kitna
kamate 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
Reply
Haha .. good one !
Reply
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 calculator
for 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 hidden
components. also many first time job changers dont realise they are also moving into higher
tax slab.
please be careful before you make a move :)
Reply
Which calculator are you talking about? Can you give me outline for it ?
17 of 28
31/03/15 2:22 PM
Reply
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 land
of no surprises when I received my first payslip.
In India almost every company inflates CTC (fortunately mine does only for annual bonus
and EPF share and not on insurance and benefits). I have heard some Investment Banks
paying 50 lacs p.a. which is just impossible to digest. But the ground reality is that 40% of
that is just your floor rent (occupying 66 cubicle around Nariman Point, Mumbai will cost
you a lot). Another instance of this is; during campus recruitment in our college a 9.5 CTC
and 11.8 CTC (diff of 2.3 = ~20,000 pm) ultimately had only 1500 per month take home
difference :-o
Its better to always ask (or at least confirm) for Gross Salary i.e. (your take home + plus
TDS + employee PF contri + prof tax). This is directly related to the employee and gives a
fair idea of how much youll take home. And it should not be a matter of shame or
reluctance for someone (usually a fresher) to ask such questions. During my hiring season;
80% of Q&A were related to compensation :)
Reply
Nice :) . Thanks for sharing that Nikhil
Pretty much story of every person :) .
Reply
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 packages
is more wide spread in the IT field then others ?
Reply
Yes, I would say IT sector is one , another is management or sales ! (MBA)
Reply
During my Fathers and grand fathers generations , employees in organizations
were happy and content. Then somewhere came MBA and things changed for
employees.
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Reply
Yea ..
Reply
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 you
can 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 low
if 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 to
PF and Gratuity (There is no better way of investment and you get it back eventually).
Reply
Yes, your right that we get the PF and Gratuity(conditionally) back, and related to PF
it is tax free when we get it back
Reply
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 first
placement 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 to
inquire about the take home salary.
During my campus placement days, I had few of my friends who were offered a CTC of 12
lacs p.a. while others were just offered 9 lacs p.a. But eventually when they calculated the
take home salary, there was a marginal difference in both of them. This was because the
company offering a CTC of 12 lacs had included an interest free loan of Rs 2.5 lacs.
Thanks for writing this story!
Reply
2.5 Interest free loan , super idea . I am sure some MBA guy in the recruiting
company must have come up with this idea and I am also sure that this placement was
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in some MBA college.

Reply
Thanks for sharing that :) . 2.5 lacs of interest free loan in CTC ! . Good one !
Reply
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 they
dont tell me my epf account no. and also get me salary by hand. How I know my epf details
please tell me.
Reply
This is just wrong . An employer has to tell you your EPF number, it has to be there
on your salary slip . You can file a RTI application to find out if they are depositing
your EPF to EPFO or not !
Reply
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 this
reduced his take home salary
this bonus is provided every 3 months
if employee leaves early ,company shows him the aggrement and policy , this and that
in the end a loss for employee.
Reply
Its just a trap :)
Reply
Most of the companies play the same strategy by showing the CTC to the employee, early of
my career, I use to hear that few companies use to add rent of the area in which an employee
has to sit in CTC, if the companies has taken any building as lease/rent.
Reply
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Yea .. many did that, many do that !
Reply
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/yourmoney/article-5-hidden-facts-about-ctc-your-employer-wont-tell-327114?pfrom=homeotherstories.
I cant believe how the author came up with exactly similar points as you. I wonder if the
author read your article several times before coming up with his own version.
Reply
Yes, I know about this . I reminded about this to author , He said Its a coincidence :) .
Reply
104 Rohit Sasikumar September 13, 2013 at 2:40 pm
Same goes for Persistent Systems as well :). Almost all the tricks are meticulously played.
Reply
Thanks for sharing :)
Reply
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 !!
Reply
True !
Reply
108 Ashwin September 13, 2013 at 5:50 pm
Guys seems this article has a secret admirer :) http://profit.ndtv.com/news/yourmoney/article-5-hidden-facts-about-ctc-your-employer-wont-tell-327114?pfrom=home-
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otherstories
Reply
Yes Ashwin
I am aware of the content theft which has happened. I am on mails with these guys
who copies it ! . Would you be able to comment on that article that it was originally
taken from jagoinvestor and you are a regular reader ?
Reply
110 Ashwin September 13, 2013 at 8:19 pm
Done, Manish..its awaiting moderation, lets see how fast they let it get posted
:)
Reply
sure !
Reply
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, I
feel employees would be aware and such tricks can be known upfront.
Reply
Thanks
Reply
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 the
components to be included in CTC. The best part is All the MNC have a Strict Code of
Conduct 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 for
Income Tax rebate and Company Contribution to EPF which is included in CTC is not taken
for Computation into Employee Income Tax rebate. If we ask for the explanation about
where that money goes on Computation there will be no answer from any Companies
Internal Dept. By doing this Many employee feel it as a Waste instrument to contribute
instead they can contribute the same amount to PPF atleast they need not have worry once
they 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 every
month. Because at the end its our money and we need to have the flexibility of how & where
it has to be placed. Apart from that Companies Deduct Professional Tax irrespective of
location. According to Law only employees who work in Metro Cities Professional tax to be
deducted. Also Professional tax is applicable who are not permanent employee and
employed as Consultant who carry special skillset. All MNC give offer letter projecting it as
Permanent employment but they are actually a Mere Consultant. In case if they shut shop
and if you ask for your Due share of settlement and speak in terms of Law they bargain with
you stating that there would be a Negative feedback once you get into another job on
background verification if you speak Law and escalate this issue. Lehman Brothers
employees in india know this better.
Also once the employee is send Onsite per Diam comes into picture. Per diam information is
not shared on CTC nor on Appraisal letters. In many cases employee is asked to quit the
indian company and accept the offer given by its foreign subsidy.But as per law if Per diam
is given Employer should provide Food, Transportation & Accommodation. But the
Employer 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, Initial
Accommodation, Food, Laundry etc.. these are not included in Offer letter and there is no
Directions available with any one.
There is a Very Big Scam in making by the MNC by the name of CTC Govt is silent as they
get more money in term of Tax. No one is Bothered about Employees and no one is
interested to be transparent. Will there be a End to all this is a Question to answer
Reply
Thanks for sharing your detailed thoughts about this topic . I am sure there is a lot of
clarity needed from EPFO front on this !
Reply
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 Criteria
3. Gratuity & Pension fund need to be returned if Employee quit before 5 Yrs. As Many
include this also into CTC Component.
4. Even Per Diam For all Onsite Employee & Benefits as per Govt Rule for employees as
per Law. In US if a person is suppose to travel by Flight above 7 Hrs Company need to
Provide only Executive Class Travel & Star Hotel Accomdation.
5. Computation & Tax Implication on Indian Salary if a Employee goes Onsite. And receive
Per Diam
6. 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 the
company 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 can
employee 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 by
Management 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 12
should 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) the
Total Gross will be computed. If employee have 3o days of Leave balance at the time he
quit the company how much money he can expect 30 day Gross salary (or) 30 Day Basic
Salary.
16. If Employee quit in middle of Financial year from the company after giving 100% he
have contributed to the Company he is eligible for his share of Variable payout during his
tenure 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 on
Freshers that they should not quit the company before bond expires. They also send a Court
Notice if the person abscond the company and many people pay the Penalty amount to those
companies How to stop this and whom to approach to get the company punished for such
act.
18. How can the employee know the TDS detucted from his salary have reached Govt tax
dept every month there is no Mechanism to track. In this way Company can Fool around on
the Deduction and avoid paying the Tax.
19. In case the PF is with Trust what Benefits Employee can avail extra like Lower interest
on Loan against PF, Higher Interest rate on PF, Etc.. If Employee get the same benefit as
EPF by govt he should be given an option to choose where he want to keep the account
Either with Govt EPF (or) Company PF Trust.
20. Whom & where to approach in case if the company does all the above. Is There Single
window for employee grevience.
Reply
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 threads
to ask each point. Its tough to get anyone answer such a long query
http://www.jagoinvestor.com/forum/
Reply
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
!!!
Reply
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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? I
mean, some one else is paying for their bonus, EPF, stocks, right?
Reply
120 Manish Chauhan May 29, 2014 at 9:51 am
I didnt get your comment Nish ? Who pays for those ?
Reply
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 in
the employees pocket, sooner or later.
Theres a reason its called CTC Cost to Company, and not IYP In Your
Pocket.
Reply
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 due
to their brand. Only one line written as Performance Linked Incentive (PLI) component in
Apt.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 again
it will be chopped off in next year. So, only 1000 incremetn p.m. Salary is remaining almost
same in 3 years. They only offer big designation so that you have to accept lower
designation at another company.
Reply
Thanks for sharing that :)
Reply
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 Emptor
applies 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 not
wrong at all. It is in fact the cost borne by the company while you work there, making use of
their premises
Example: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 has
caused 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 telephone
usage.
While the other options like One Time Bonus or Stock Options dont seem to provide
instant money in hand, or periodic income like Salary; at the end of the day, it is still
something 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 withdraw
or transfer. So it is a legitimate cost to company. Just because it does not translate into
money 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 the
candidate to check what is the Fixed component and whats the Variable component in the
salary. You can ask in the interview and the person can highlight the fixed components and
variable/one-time components.
If you feel the Performance-linked component is very high (Id call my CTC unacceptable if
more than 20% of it is performance-linked component), feel free to discuss, negotiate, or at
least understand how the performance is judged. If it is subject to your managers ratings
alone, you have little to count on that money!
However, if you are saying that you saw something written clearly as one-time bonus, or
stock options and still went ahead and divided those amounts by 12 to secure your place
on 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 fixed
and more performance-linked. I work with Hewlett-Packard. My CEO, Meg took $1 as her
ANNUAL salary for a couple of years since she joined HP as she was determined to turn
around the company. However, that does not mean HP did not incur any other costs, or pay
her 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 part
of 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 cannot
get the company to perform better, which would get the stick price to go up, thus making her
a handsome profit!
So why not get used to Performance-linked money from now on, and strive to earn as much
as you can Understand that everyone at your level would have more or less the similar
package and that would mean if your performance is stellar, you get to have a lions share of
the PLI component while your colleagues get less!!!
Reply
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Thanks for sharing your views on this topic
Reply
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 the
websites in the public domain
http://www.usatoday.com/story/money/2014/02/03/hp-ceo-meg-whitmans-pay-package
/5181305/
Reply
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 Lakh
is 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 is
one of top 4 japanese MNCs (mechanical)
Reply
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 a
benchmark . So you are going well !
Reply
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 variable
component. its all fixed component.
Reply
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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BASIC
FEP
PF
Gratuity
Insurance benefits
Emergency Medical Fund
Annual Gross
Performance bonus
These are the components available in my Offer letter and I am confused how to calculate
the Take Home from this. I came to know that the take home is lesser in Mindtree while
since I have a 3 year gap in my career iam bound to accept this offer. Pls help ASAP.
Reply
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 expert
on the issue and pay them for the advice.
Manish
Reply
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