Consider this: Fresh out of college, you receive two job offers. One company gives a fixed annual salary of Rs 2.5 lakh, without any variable component. Another firm offers you a salary (CTC or cost-to-company) of Rs 4 lakh, including a signing bonus of Rs 1 lakh and a performance-linked incentive of up to Rs 1 lakh. Which of the two companies would you join? Here are some helpful insights for you to solve such dilemmas:
Fresh graduates and junior-level professionals appear to be spoilt for choice at the present, with information technology (IT) majors and tech start-ups, among others, on a recruiting frenzy. Companies’ intent to hire fresh graduates has climbed by 7 percentage points in the current quarter, according to a report.
However, your lack of experience may lead you to make poor decisions while evaluating offers. “A number of recent grads make the error of misinterpreting the compensation structure. Some companies don’t go into great detail about the break-up and instead rely on the CTC. While a larger overall package may appear appealing, offers that provide higher regular and fixed pay have more value. A sign-on bonus, for example, is a one-time deal. Your income will be lower the following year,” says Aditya Narayan Mishra, CEO of CIEL HR Services.
This is also true for professionals in different phases of their careers. Make sure your compensation offer does not include a significant variable component, such as a 50% bonus tied to targets. “These are traps,” says the narrator. Given your lack of experience, your ability to meet these goals as a recent graduate would be constrained. Instead, be specific about the net take-home income you demand, says Kamal Karanth, co-founder of Xpheno, a specialised employment firm.
And you must first arrive at a compelling figure in order to receive the take-home pay — the real amount deposited to your bank account – that you believe you deserve. Calculate your monthly basic expenses, such as fuel, food, rent, and EMIs, carefully. It will assist you in determining the monthly take-home pay that you will require. “Authenticity can assist a lot of times. Describe how that sum is required to cover your living expenditures and other non-discretionary expenses. The clarity will aid in justifying the figure you’re using,” Karanth adds.
A larger starting wage is beneficial. It should ideally not be less than half of the entire gross salary. This will ensure that a larger portion of your payroll goes to your employees’ provident fund account. A greater starting income implies more money goes into your retirement account. Every month, your employer deducts 12% of your basic (and dearness allowance, if applicable) pay as an EPF contribution. They must also contribute a matching amount, with 8.33% going to the employees’ pension plan (EPS). Employees are obliged to save as a result of these policies, allowing them to build up a sizable retirement fund. It should take precedence over the other perks on offer.
Also, keep in mind the insurance that both businesses offer. Many offices provide coverage for life and health insurance. You won’t be able to haggle much on those, but it’s worth knowing what the organisation has to offer in terms of advantages.
A health insurance policy, in fact, largely covers hospitalisation and day care costs. As a result, don’t approach it like a kitty that you can dip into to cover ordinary medical bills.