Unethical Practices in Compensation
About a year back, one of my acquaintances joined a private limited company with offices in Mumbai. After several rounds of PI, he accepted the offer to join a senior management position as he was offered a decent package as CTC. However, to his great surprise, he was given about one-third of his entitlement by cheque and the rest in cash. The appointment letter itself mentions a fixed amount and performance-based variable amount; but the salary slip mentions only the amount paid by cheque. The working atmosphere in the company is good, but my friend is worried about his career and future prospects in case he has to change his job. Please suggest a course of action.
From India, Mumbai
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2About a year back, one of my acquaintances joined a private limited company with offices in Mumbai. After several rounds of PI, he accepted the offer to join a senior management position as he was offered a decent package as CTC. However, to his great surprise, he was given about one-third of his entitlement by cheque and the rest in cash. The appointment letter itself mentions a fixed amount and performance-based variable amount; but the salary slip mentions only the amount paid by cheque. The working atmosphere in the company is good, but my friend is worried about his career and future prospects in case he has to change his job. Please suggest a course of action.
From India, Mumbai
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Hi Deepak,
I can see either of the following happening:
1. The company earns more than it reports in its taxable income. This way, it has got black money, which it distributes as cash salary to employees. This means both underreporting of incomes and expenses.
2. It wants employees to save on tax. Cash salary means no record of money received, no TDS, and no tax - your friend will hear this thing when he receives Form 16.
3. The implication for your friend will be that he will be considered an active tax evader (if he gets caught). Later on, when he switches jobs, he will be at his wit's end to prove to the other company that he earned this much. In most companies, they cap the hike as a percentage of your previous company salary.
4. In getting bank loans, housing loans, etc., the same problem will also arise.
Personally, I feel it's a pretty risky affair to be in such circumstances.
From India, Lucknow
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I can see either of the following happening:
1. The company earns more than it reports in its taxable income. This way, it has got black money, which it distributes as cash salary to employees. This means both underreporting of incomes and expenses.
2. It wants employees to save on tax. Cash salary means no record of money received, no TDS, and no tax - your friend will hear this thing when he receives Form 16.
3. The implication for your friend will be that he will be considered an active tax evader (if he gets caught). Later on, when he switches jobs, he will be at his wit's end to prove to the other company that he earned this much. In most companies, they cap the hike as a percentage of your previous company salary.
4. In getting bank loans, housing loans, etc., the same problem will also arise.
Personally, I feel it's a pretty risky affair to be in such circumstances.
From India, Lucknow
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Dear Rajat,
Many thanks for your email. You have precisely identified the situation. Your deduction at Sr. 1 is a fact. Your observation at Sr. 2 is what the company tries to pass off as a plus point. Your conclusion at Sr. 3 is exactly the dilemma. Your conclusion at Sr. 4 is a fact. This leaves us with the question of possible courses of action. Please remember that the total package as such is substantive.
Best regards,
Deepak.
From India, Mumbai
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Many thanks for your email. You have precisely identified the situation. Your deduction at Sr. 1 is a fact. Your observation at Sr. 2 is what the company tries to pass off as a plus point. Your conclusion at Sr. 3 is exactly the dilemma. Your conclusion at Sr. 4 is a fact. This leaves us with the question of possible courses of action. Please remember that the total package as such is substantive.
Best regards,
Deepak.
From India, Mumbai
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Hi Deepak,
Let's agree on one thing: your friend does not want to shout and prove to the company that they are doing wrong. Rather, he is more interested in protecting himself against any complications that may arise.
So instead of wasting time on guessing why the company is doing it likewise, it's better to:
1. First, calculate how much monthly money your friend is actually receiving (both cash as well as through the bank) and see how much tax the company is deducting. Obviously, they are issuing him monthly payslips showing all heads of earnings and deductions, which feature the TDS figure as well, and how much tax it should deduct. This will give a first-hand idea of whether it is a tax evasion ploy or something else.
2. After this, it's better to ask plain questions to HR/Payroll about how and why they are paying in cash. Remember, it is not against best practices, and also strictly not legal if the monthly cash outgo per employee exceeds a predefined limit. This way, he will come to know the real motive behind all this.
3. If not much information is made available on this front by the company, it's better to ask colleagues/seniors whether the proportion of cash to bank (67:33) is equally distorting in their case as well. And how do they view it.
Hope I am making sense.
Regards,
Rajat
From India, Lucknow
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Let's agree on one thing: your friend does not want to shout and prove to the company that they are doing wrong. Rather, he is more interested in protecting himself against any complications that may arise.
So instead of wasting time on guessing why the company is doing it likewise, it's better to:
1. First, calculate how much monthly money your friend is actually receiving (both cash as well as through the bank) and see how much tax the company is deducting. Obviously, they are issuing him monthly payslips showing all heads of earnings and deductions, which feature the TDS figure as well, and how much tax it should deduct. This will give a first-hand idea of whether it is a tax evasion ploy or something else.
2. After this, it's better to ask plain questions to HR/Payroll about how and why they are paying in cash. Remember, it is not against best practices, and also strictly not legal if the monthly cash outgo per employee exceeds a predefined limit. This way, he will come to know the real motive behind all this.
3. If not much information is made available on this front by the company, it's better to ask colleagues/seniors whether the proportion of cash to bank (67:33) is equally distorting in their case as well. And how do they view it.
Hope I am making sense.
Regards,
Rajat
From India, Lucknow
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