Dont get fooled by High CTC offered by your employer

POSTED BY Jagoinvestor ON September 2, 2013 COMMENTS (187)

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

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). It’s 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 ‘employer’s share’ of EPF from my salary. I was wondering – “If it’s the employer’s 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, RSU’s 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 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?

187 replies on this article “Dont get fooled by High CTC offered by your employer”

  1. charu says:

    Hi ..can term insurance & medical insurance be kept out of CTC as per request.

    1. Jagoinvestor says:

      What do you mean?

      CTC means cost of company .. its the definition .. How can you keep it out of it ..

      1. Naveen Negi says:

        It is different in company to company.
        Mostly service based companies adds everything in package but if u check package for most of product based org , they shows only in hand and your pf contribution in salary package. They never adds medical, variable and gratuity in ur ctc

        1. Jagoinvestor says:

          Thanks for informing ..

  2. Abhay says:

    Can you somebody please help?
    I am looking for legal law link which tells what is the maximum limit of percentage company can define as Basic salary and HRA in pecentage.. My company is giving me 70% basic and 18% HRA and saying its as per law?
    I am looking for legal document or law link, so that i can raise my concern back.

    1. HRA is decided by govt rules. BASIC is decided first and then rest of the components are added, not vice versa !

  3. Dhruv says:

    Hi Manish,

    Just recently I have selected in one of the reputed Furniture Design Field Company, and when I request to HR to give me a minimum 30% hike as compare to my previous salary, they included Variable performance pay in as part of my salary and they are not offering any additional Incentive or Bonus to me and I really don’t have any idea that, is this the way company give the hike?
    KIndly guide me.

    They told me that, I will eligible for bonus if I perform extremely high and if my manager recommends.

    My break up of salary is something like this:-

    Base Pay – INR per month
    Basic- 16,042
    HRA – 6,417
    Conveyance Allowance – 2,000
    Special Allowance- 18,104
    Total Base Pay- 42,562

    Medical Reimbursement (Payable half-yearly) 1,250
    Telephone/Mobile Reimbursement (Payable half-yearly) 1,250
    Total Reimbursements- 2,500

    Gratuity (Payable as per the terms of Gratuity Act, 1972)
    Total Retirals – 771

    Total Fixed CTC – 45,833

    *Variable Performance Pay (Payable annually) – 6,250

    Total CTC- 52,083

    Additional Benefits
    Insurance – Group Mediclaim: INR 300,000 of sum insured
    ii. Insurance – Personal Accident Policy: INR 900,000 of sum insured

    D Patel

    1. Sir, the simple answer is the company will decide how they want to give HIKE. If they dont want to give they will not give.

      All you can do is continue with them or leave and join other place. Only that is in your control

  4. sravan says:

    when we are moving to new company and for negotiation on salary we need to ask hike %age on fixed pay or on fixed pay+variable pay what we are getting in the previous company??

    1. Thanks for sharing that sravan

  5. rakesh says:

    Hi Manish,

    Even though i have consulted the HR regarding the take home part, He didn’t actually calculate the exact amount. I am little worried about the take home part. Can you please go through the below mentioned details and let me know the net take home each month. Would be really kind of you.

    my break up of salary is something like this:-

    A: Basic Salary (Base Pay) Basic Salary ( Base Pay) 363,607

    B : Non Basic Salary (Non Base Pay)
    House Rent Allowance (HRA) 181,804
    Transport Allowance 19,200
    Medical Reimbursement 15,000
    Food Coupons 13,200
    Leave Travel Assistance 30,301
    Bonus / Ex-gratia 19,572
    Special Allowance 396,194

    TOTAL (B) 675,271

    COMP 2: TOTAL (A+B) = 1,038,878

    C: Retirals
    Provident Fund (Company’s contribution) 43,633
    Gratuity (Company’s contribution) 17,490
    TOTAL (C) = 61,122
    Total Gross Compensation: A+B+C = 1,100,000

    Additional Benefits:
    – Variable Incentive Plan upto INR 87,000/- p.a.
    – Shift Allowance upto INR 115,500/- p.a.


    1. Hi rakesh

      This query belongs to CA domain, hence we are not the right people to comment on this issue.

      I suggest you get in touch with a CA for this in your city.

      We also have a CA partner incase you want to explore that, Just fill in your details here and they will give you a complimentary call back


    2. Target says:

      Shift allowance cannot be calculated under CTC. Rest other parameters are usually there. Variable pay should not be 0 in any case. It should have some logical range. Like we have 0.5 – 2 ramgey

  6. Santosh says:

    Hi Manish,

    Let we know the current Bones and Ex-Gx rule..

  7. Joe says:

    My CTC is 6.3
    5.16 fixed + VP remaining.

    In my recent appraisals my hike% was calculated on only fixed part not on my total CTC.

    I was disappointed, Is that how hike Is calculated?

    1. Anjan says:

      There is never a fixed rule for these things. It varies from company to company. Even the hike % varies from year to year. It’s all based on the company’s performance or atleast that’s what they.

    2. Company has decide its own rules !

  8. Gaurav says:


    Can EL (Earned Leave) be part of CTC component ?


    1. I am not sure on that !

  9. Habeeb says:

    Hi, currently I offered from aricent with 6 lpa include 60k per annum variable pay.Actually I have offer in hand with 5ctc fixed pay.After this 5 cycles offer I got another offer from aricent 6 lpa that I mentioned above.Is it good enough for me? My designation is SSE. In my salary breakup v.p included.

    1. Thats something we cant judge from our side.

  10. Sameer says:

    Dear Manish, while getting into an interview process with any company, the first question is the hike expected by the candidate and the generic answer is 30-40% industry standard. Please advise on what an employee should quote (smartly) or ask for (I am keeping everything else constant – Designation, years of experience, role etc) considering the manipulations (difference may be a better word) in CTC that HR/new organization may do? So, in other words, what is the ideal way to negotiate to ensure that one get ~30% hike on take home?

    1. Hi Sameer

      I am not the right person to talk on this point.


  11. Parag says:

    Hi Manish,
    Recently I’ve joined a Company which has 24×7 work environment. So, I’ve to work in Night shifts also. In my CTC, they have mentioned Special Allowance of Rs. 5000/- per month.
    When I asked about my Shift Allowance I have been told that the Special Allowance what is mentioned in my CTC is the Shift Allowance and I’ll not be getting shift allowance separately.
    But, how they can include Shift Allowance in my CTC? As per my understanding, Shift Allowance is paid separately and it also differs from shift to shift.
    Please guide me.

    1. CTC has everything . Thats why its called CTC . Cost of company . I dont think company is at fault here !

      1. Parag says:

        Thanks for your reply.
        But, in the CTC breakups, they have not mentioned Shift Allowance and nowhere in the offer letter. Company said, the Special Allowance which is in my salary breakup is the shift allowance. How is it right? Can I fight on this point?

        1. Himanshu says:

          That is how they play with the Offer letter lingo, special allowance is being used as anything-else-that-is-not-mentioned-exclusively (read shift allowance). I am not sure if you can fight on this, get a legal opinion on this matter.

    2. Suprith says:

      its cheat. You should get shift allowanace separatly.. I t can not be included in CTC.

  12. ram says:

    So is it good to have a VP as zero for 10.5 lacs package?

    1. That cant be answered 🙂

  13. says:

    Hi Manish,

    True that all hiring companies highlight the CTC amount, however on selection and during offer negotiation, the candidate is free to ask questions on his salary components, know the periodicity of pay for those components, understand the performance linked variable pay scheme and calculate the “in hand” salary excluding income tax. It is up to the candidate to ask these questions before taking a conscious decision to join any organisation.

    1. That correct, but 90% are ignorant on this in the start of their career .

  14. SivaramaKannanP says:

    Hi Manish,

    Is there a ratio to set the Variables according to Total CTC or is it common %? Kindly advise.

  15. Boby says:

    Every company does the same problem…especially when top MNCs rely on consultancies to get the job done by hiring candidates, they say its so much lakhs that candidates with open mouth accept it, when joining in a concern finds that they get half of the pay which is highly and cleverly cheated by MNCs.

    1. Thanks for your comment Boby

  16. manish says:

    the EPF thing is i guess done by every IT company…its very dat a wrong thing at first place ?

    1. No , its not wrong as such , just that one should be aware that it happens like that 🙂

  17. Vipin Kolani says:

    In Wipro, Gratuity is part of your CTC which is only paid after 5 years. This is crazy as this company is supposed to be one of the most ethical companies in the world.

    Why is the government not penalizing these organizations that are really openly cheating their employees?

    Firstly, Why should I be bother how much I cost to the company? It is totally irrelavant to me as an employee.
    Secondly, Why should variable pay be part of the CTC when it is unknown because it is variable, then how would that be cost.
    Thirdly, Every employee should know how much he is going to take home (ofcourse after deductions, taxes etc).

    This is just a tactic and does not help anyone but the corporates. This is what will happen when you have Jurassic age labor laws.


    1. Yes Vipin

      Thats the reason why one has to ask for the in hand pay package !

  18. sweta says:

    I joined a company recently n in my salary break up gross salary and ctc is same i.e, 30088 where 1800 is deduction of PF from employee side n same from employer side also. result as result there is deduction of 3600 from my gross.
    what can I do, plz suggest.

    1. Most of the employer put their contribution also in CTC, hence they are deducting 1800 for you and 1800 as their contribution. This is how it happens in most of the cases


      1. Madhu says:

        My Company have a Cycle for Variable Payout. I joined in the month of Dec’14. But to get my variable payout I need to earn it…Like Apr-Mar is the Cycle to earn the points, The Payout will happen twice-Apr and Oct, I will get my variable payout in the month of Oct only (the points earn from the month Apr-Sep’15) …There will be nothing for Dec-Mar…I am so disappointed with this way of calculation. It was never said or mentioned by HR at the point of negotiation.

        1. Welcome to the world of HR tricks !

  19. Yachana says:

    Hi, I currently have a offer from a company with 5.5Lpa CTC in Pune.
    Right now I am in delhi with present CTC 2.8Lpa(but living with Family).
    Is it good to go Pune for that CTC.

    1. Ramesh says:

      Its difficult as you have pay rent which will run in to 12+ for a decent 2BHK apartment. Also please check how much your take home is and also the be cautions on the variable pay (VP). Not much companies pay 100% VP.

      Hope you are searching for another job in Delhi. As you are on notice period many companies might be interested (in getting a resource who can join them asap.)
      Good Luck

    2. Yachana

      I am not sure how can any one else answer this for you. If you are fine with the salary then you can go ahead !

  20. Ramya says:

    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 Mindtree’s compensation Structure.

    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.

    1. 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.


  21. ali says:

    I forgot to mention that, my current CTC is 7.6 Lakhs…in which there is no variable component. its all fixed component.

  22. ali says:

    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 MNC’s (mechanical)

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

    2. Akshay Erande says:

      Hi ali could you please tell me what is the current ctc of yours

  23. Soaham Parashtekar says:

    Forgot to add the link for Meg’s compensation… the data was taken from one of the websites in the public domain –

  24. Soaham Parashtekar says:

    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 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 don’t 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 what’s 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 (I’d 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 manager’s 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. Here’s 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 lion’s share of the PLI component while your colleagues get less!!!

    1. Thanks for sharing your views on this topic

  25. S.Das says:

    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.

    1. Thanks for sharing that 🙂

  26. Nish says:

    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?

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

      1. Nish says:

        I was trying to be cynical. I wouldn’t 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 employee’s pocket, sooner or later.

        There’s a reason it’s called CTC – Cost to Company, and not IYP – In Your Pocket.

  27. Guest says:

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

  28. Shan says:

    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.
    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.

    1. 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 –

  29. Shan says:

    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 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

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

  30. 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.

    1. 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 ?

      1. Ashwin says:

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

  31. Ravi says:

    So the creme dela creme of India’s ‘children’ should also be taught how to read a CTC !!

  32. Rohit Sasikumar says:

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

    1. Thanks for sharing 🙂

  33. Bharat says:

    Hi Manish,

    I read similar article in NDTV today and here is the link.

    I can’t 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.

    1. Yes, I know about this . I reminded about this to author , He said Its a coincidence 🙂 .

  34. Jagan says:

    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.

    1. Yea .. many did that, many do that !

  35. nitin bourai says:

    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.

  36. Sunil Kumar says:

    Hello Manish,

    I am also worked at ltd company, I know my employer deduct epf from my salary but they don’t tell me my epf account no. and also get me salary by hand. How I know my epf details please tell me.

    1. 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 !

  37. Snehal Sukhadia says:


    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!

    1. Joel Trinidade says:

      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 in some MBA college.

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

  38. Rajesh says:

    Don’t 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. Don’t get worried that you are contributing more to PF and Gratuity (There is no better way of investment and you get it back eventually).

    1. Jagan says:

      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

  39. Joel Trinidade says:

    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 ? “

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

      1. Joel Trinidade says:

        During my Fathers and grand fathers generations , employees in organizations were happy and content. Then somewhere came MBA and things changed for employees.

  40. Nikhil says:

    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 6×6 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 😮

    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 you’ll 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 🙂

    1. Nice 🙂 . Thanks for sharing that Nikhil

      Pretty much story of every person 🙂 .

  41. harsh says:

    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 don’t realise they are also moving into higher tax slab.
    please be careful before you make a move 🙂

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

  42. Wriju Bharadwaj says:

    Good article ….

    Due to several factors esp. variable pay components causes confusion as we don’t 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

  43. 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.

    1. Yes, correct

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

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

  44. Chitra says:

    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.

    1. Thanks for sharing Chitra

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

  45. Mittal Shah says:

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

    1. Thanks for sharing that Mittal !

  46. AkMEhta says:

    its a little disturbing when the on hand take home decreases and hence the article is must read for all those who are thinking to change their jobs.

    1. Thanks for appreciation 🙂

  47. PrAvEen says:

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

  48. bharat shah says:

    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.

  49. Shib says:

    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 I’ve got all my answers whenever I’ve asked. One of the company also made me talk to their accounts department to let me know of the details (I guess the HR didn’t have all the details). So employees should ask the details.
    Another point I’d 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).

    1. Yea Shib

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

      1. Shib says:

        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 !!

  50. RAMESH says:

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

    1. Its just an awareness article, so that people atleast know how things happen and can be cautious next time

  51. Sumanth says:


    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.

    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

    1. True . this is very very important . I have seen people relocating and putting lots of money only to realise they have to relocate again 🙂

    2. Anjan says:

      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.

      1. 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 !

  52. Karthik Reddy Chintaparthi says:

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

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

  53. Ashish says:

    oh there are still understandable. I have seen companies putting cost of rent for the cubicle where you sit in their CTC’s. Now a rent in nariman pt in mumbai alone jacks up your CTC by 10 – 12 L per yr.

  54. AkMEhta says:

    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

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

  55. Anil says:

    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).

    1. THanks for sharing that Anil 🙂

  56. Nikhil says:

    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.


    1. Thanks for sharing that 🙂 . As I said , in small companies the CTC is the take home only !

  57. Kranthi says:

    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.

    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.

    1. Always join once you get every confirmation on writing !

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

  58. Govarthanan says:

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

    1. Ratan Tata says:


  59. Rohit says:

    I fell for the 1st point – Employer contribution deducted from CTC 🙁 very shocking when I received my first paycheck.

    1. 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 ?

      1. Rohit says:

        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”.

        1. 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 . !

  60. Govarthanan says:

    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…

    1. yea , I know you mean not trapped !

  61. Ashvin says:

    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%?

    1. Its just a (honey)trap !

  62. Rajasekhar says:

    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 .

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

  63. Joel Trinidade says:

    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 .


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

      1. Joel Trinidade says:

        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.


        1. 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.

          1. Joel Trinidade says:

            Thats where your expertise and resources come in Manish. I listed 5 points why i dont like food coupons to start with.

            1. Thanks for listing those . Let me check them !

        2. Jagan says:

          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\-

  64. Maulik says:

    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.

    1. Robin says:

      Manish isn’t 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 don’t 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 🙂

      1. 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.

    2. 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 ?

    3. A says:

      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.

  65. manyam says:

    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 :-).

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

  66. abhisheka says:

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

    Must read for students.

    Thanks Manish

  67. Nandan says:

    I fell for a similar trap while joining an IT MNC recently (from another which was equally good at inflating its VP compoment). It’s 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) 🙁

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

    2. MrGaurav says:

      Thanks Nandan…its really helpful…now onwards while joining any offer i will ask ctc split up from employer…

      1. surjif says:

        i earn 45 lakh per year but i am unhappy i want to open my own company

  68. Srinivas says:

    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.

    1. Yes. The article aims at that only .

  69. NAGAMOHAN M says:

    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.

  70. Amit says:

    I am not sure…But That is not wrong practice by companies…..CTC does mean Cost to the company… all the component which has been mentioned in article is called part of CTC only….Can not be counted seprately…. In simple way…cost paid by company for one particular employee…..All the components are some how given to employee only…. I would rather say…The way employee look at this CTC is wrong…CTC 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 salary…then they should compare it with salary they were getting….

    1. Sathya Thambusamy says:

      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.

    2. cbrcoder says:

      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 can’t compare CTC…

      1. Jai says:

        @cbrcoder – Lets’s 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 before joining.

  71. King says:

    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.

  72. RK says:

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

  73. RP says:

    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.


    1. SameSaga says:

      It’s Accenture

      1. RP says:

        Yes. Its Accenture.. 🙂

        1. abhisheka says:

          That’s very helpful comment for me! If got any opportunity there… 🙂

          1. RP says:

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

  74. Aravinth says:

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

    1. Thanks for sharing . can you explain your case ?

      1. Rajesh says:

        I am working in one of the small IT company were there is a fixed component of X fixed amount mentioned in the CTC as performance bonus which was offered while joining . during the first year this was paid in full but for the next 3 years it was neither refused nor paid .This was done to hold back the person in case of leaving the company. What are the options available to claim this amount back as this is now a good sum as management does not respond nor refuses this amount. can we file a suit against this unethical practice to claim this amount and resign from the company

        1. It should ideally be given back to you only !

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