Facing a Tough Choice: Should I Accept a Job Offer with a Lower Basic Salary but Higher CTC?

Hi! I'm working in an MNC in Gurgaon. Recently, I received an offer letter from an MNC in Kolkata. I'm currently earning 6.63L, and they are offering 8.25L, which is a 25% hike on CTC. However, based on their salary breakdown, they are only offering a 5.4% hike on take-home pay, with the rest shown in bonus, SA, gratuity, etc.

1. Now, my basic salary is Rs. 24,885, and they are offering Rs. 19,900. Would it be wise to accept a salary with a lower basic amount than my current one?
2. Is it possible to structure a salary breakdown without including gratuity and medical insurance so that I can increase my take-home pay?
3. How should I allocate the flexi pay of Rs. 33,000 to maximize tax benefits and increase take-home pay?
4. Are bonuses and SA taxable?
5. What are the pros and cons of accepting this offer? A comparison of the offers is attached.

Please provide your valuable suggestions at your earliest convenience.

With Thanks & Regards,
Apekhya

Hi!

13 views... No reply... :( :( ... This is urgent. Please reply soon. Waiting for your valuable suggestions.

Regards, Apekhya

Try to negotiate with HR. This is quite concerning because, ultimately, it is the take-home salary that matters. If they really need you, they would try to work it out. I don't think you should accept a lesser basic pay. I'm not an HR professional, but I have fallen into this trap once and regretted it; hence, I'm giving my opinion.

Thanks,
Shikha

Hi,

It is not advisable to go for this offer; negotiate with the HR. Salary breakups are as per the company policy, so if gratuity is included, HR will surely mention it in the CTC. You have only one choice, i.e., negotiate, and all the best.

Regards,
Gajra

Hi,

Look at two components:

1. The tax you ultimately pay.
2. Your take-home pay.

If it is good, take up the job or be plain and factual with them. Ask how they can help you get the best on these two points. If they can't help, just walk out... I believe the rest are all gimmicks.

Good luck,
Dev

Hi,

Every company has its own salary structure keeping in mind the employer and employee. They are offering more than 50% of the basic salary. It's ideal, no problem if you accept that.

Hi Apekshya,

If you receive a lower basic salary than the present one, it will affect your gratuity, bonus, etc. So, try to negotiate with HR. I think they will be willing to negotiate.

Thanks and regards,
Devendra R Chedge

Never accept this offer because, at any point in time, if they don't need you, they will cut down your bonus amount. As per your offer letter, you will receive only your fixed salary as the bonus is not a part of your salary; it can be paid only once or twice a year. You should approach HR and inquire about the reasoning behind this type of salary structure. In my organization, we utilize a standard salary structure that includes a performance allowance. This allowance constitutes 25% of the salary and is variable, fluctuating based on individual performance.

If you require any further assistance, please feel free to contact me.

Regards,
Kinjal

Hi Apekhya, as per my view, the basic salary will affect your PF, take-home pay, and bonus (as someone else also mentioned). So, I would suggest not joining, but again, seek advice from experts or a finance professional. If anybody from CiteHR would like to offer advice, please do so, as this is a common scenario where many people get caught up.

Thanks,
Rinkudev

Hi Apekhya,

You didn't mention clearly about your CTC. Please provide the complete breakdown of your present and offered compensation.

Regards,
Sathasivam
HR Manager

Please don't make that kind of mistake. They are cheating you, I think, for the company's profit. I am the CEO of the construction company; please beware of that.

As per the details given to me, your offered CTC is correct because they have informed you about a 25% hike in the present CTC only, not in take-home or any other part. I think they would have asked for your CTC, and you would have replied that your CTC is 6.63 L. So, they have decided to offer a 25% hike in your CTC.

Also, your present CTC that you have mentioned is not ideal. Check out your benefits like Bonus and Gratuity, which are not mentioned.

Regards,
Sathasivam
HR Manager

Hi! Thanks for your reply. I have given them the total breakup of my present salary during my interview. My present company doesn't offer bonuses and gratuity to any of the employees. If I join with less basic, will it affect my next job change? Please suggest.

With Thanks & Regards,
Apeksha

You are absolutely right - "If I join with less basic, will it affect my next job change? Please suggest."

I have examined the CTC components; the Take Home may appear slightly higher, but when you consider the PF, there is hardly any difference. Others have also pointed out correctly that many of these allowances are conditional. In fact, looking at the salary structure, it is evident that your present company is better and fairer in dealing with employees. I would not advise a change/relocation.

Warm regards.

Dear Raj Kumar Hansdah,

You are absolutely wrong because did you think about that the present CTC does not include bonus, gratuity, and Special Allowances. It is legally payable, but it is not paid in the present company.

Regards,
Sathasivam
HR Manager

Impact of Basic Salary on PF Contribution

Based on my experience as an employer, I would like to minimize the basic salary because the higher the basic salary, the more the PF contribution for the employer, and the same holds true for the employee, resulting in a lower take-home salary. If the CTC is higher, you will receive more benefits as fringe or non-monetary benefits, etc.

In our sector, salaries are lower compared to other sectors, but we receive more non-monetary benefits. I hope you understand.

Dear Csatha,

Thanks for your opinion and for pointing out that I am "absolutely wrong." However, I wish to differ with your opinion. Dear friend, my suggestion was not based solely on simple arithmetic on CTC; one needs to analyze and go beyond the figures presented.

If a company provides less basic pay and more in terms of allowances, that indicates a tendency to avoid various legal dues and taxes, as they are typically calculated based on basic pay. Just as employers are cautious of candidates who frequently change jobs, one should be wary of companies that engage in such practices.

Moreover, the present company appears to be more credible as they have not included bonus and gratuity in the CTC. Consider how much her present CTC could have been inflated if her current company had included these figures.

- Notice how the reduction in basic pay has decreased Provident Fund contributions, which serve as lifelong social security.
- Special Allowance is still an allowance, hence conditional.
- Gratuity is also "conditional" and is not paid every month.
- Performance Bonus is variable and the calculation basis may change monthly.
- If we remove all these hypothetical amounts, what remains?

Furthermore, what does it say about a company that flaunts these imaginary figures to attract candidates?

Additionally, her present company may be providing her with incentives or ex-gratia in lieu of a bonus, as she may not be eligible for a bonus as per the Payment of Bonus Act, 1965.

You do not have to agree with my views, as they are directed towards the individual who initiated this discussion. I encourage you to present your own views for the benefit of the group member, rather than reacting negatively to others' opinions, as this could lead to unnecessary arguments. I mention this with respect for your superior expertise and experience.

Warm regards.

Dear All, Thank you for giving your valuable suggestions. As my present company is a new company in India and it started its operations in India just 2 years ago, they do not provide any gratuity or bonus. I am also not convinced to join for a lower basic salary. When I think about bonuses, it is a variable factor with no guaranteed value. If I deduct the total bonus amount, the offered CTC amount will be equal to what I would receive after appraisal. I will speak with the HR of that organization.

Anyways, thanks a lot to everyone. Have a nice day!

With Thanks & Regards, Apeksha

It all depends on your negotiation. CTC includes everything that will cost the company. In the above case, CTC rise is 25%, and net take-home is 5%. It depends on the individual how beneficial this offer is.

Understanding Salary Components

1. Basic salary is the fixed part of the salary. If the basic is less, it affects other direct or indirect benefits/saving contributions (HRA, Bonus, PF, Mediclaim, etc.).

2. Gratuity or Mediclaim is a saving contribution from the company and is beneficial for the employee. Each company has its policy, and an employee must align with it. If the company has a better policy, it's not wise to deny it. The company will not exempt an individual employee from their CTC structure.

3. Yes, it is possible and legal. You can plan taxes and increase the take-home amount. By investing in tax-saving instruments under Section 80C, such as PPF, Equity Linked Saving Scheme (ELSS), etc., you can save taxes.

4. Yes.

Pros and Cons of the Offer

5. Pros: You get an increase in some direct benefits (DA, Conveyance, Med, LTA, HRA) and receive additional saving contribution benefits (Gratuity & SA) and performance incentives.

Cons: A lower basic salary affects all benefits.

In a word, your offer is good, and you can join.

Regards,
Rubaet Bin Aziz