Understanding Salary Components and Negotiation in Job Offers

Hello Everyone,

This is my second request to you all. I am desperately looking for the answers to these:

1. If anyone can update me on when an employee (starting from an Executive to the Top Management) joins a new company after leaving the old one, then what components of his salary are considered by the new company while giving him a raise/hike in his salary?

2. Are the concepts of CTC and Gross salary the same, or are there some underlying differences between them?

If anyone can update me in simpler terms. Waiting to hear from you people.

Thanks :roll:

Hi Prashant,

I just wanted to help you out with whatever little understanding I have. I also believe someone else has sent this reply earlier; anyway, let me repeat it for your convenience:

Net Salary (cheque amount) + Employee PF = Gross Salary
Gross Salary + Employer PF Contribution = CTC

Let me also add here that there are other annual benefits that you may include in CTC if you are giving them to your employees.

About your first query, I am a little confused - what I know is that every company has its own salary structure, and once the net package or CTC has been finalized, you make a package as per your policies. In case of extra perks - that again has to be discussed during the negotiation stage itself.

Hope I have been able to help you out a little.

All the best,
Pooja

Hi Prashanth,

The gross salary components should be taken into consideration for salary fixation. CTC is derived from the gross salary plus other annual reimbursements (Medical, LTA, etc.). Generally, for salary negotiation purposes, it is discussed based on CTC. Ultimately, any HR person will talk along the lines of CTC to potentially save a few thousand.

Regards,
Naveen

Hi Pooja,

Thanks for the answers, but I still think that there was some confusion that remained. I will try to help you understand with the help of an example.

Let's say, for example, you are an employee of XYZ Co. as an IT Manager. You had an interview with another IT Co, let's say ABC. They liked you and want to hire you. My question is, when ABC offers you to join their company, they would definitely propose a particular hike or raise in your current salary to make you interested in joining them. I want to know which components of your current salary they would take into consideration while proposing the raise. Would it just be (Basic Pay + HRA), or would there be more items included as standard in calculating a raise or hike in your current salary?

Hope I am clearer now.

I am waiting to hear from you. 🤔

Hi,

What I can tell you from my experience so far is that companies make offers based on either gross salary or CTC rather than considering basic/HRA, etc. The hike is given on the gross/CTC itself, and then their own salary breakup is applied to it. If anyone else has any other views on this, please do let us know.

Cheers,
Pooja

Hi,

I agree on that, but when a company would be proposing a hike on a gross salary or on CTC, there must be some base for that. On average, industry standards for a hike range from 20% to 40%, depending on negotiation, the level of the job, and sometimes go more than that. But at the same time, when a company would be giving a hike of let's say 20% on somebody's CTC or gross salary, they definitely have to adjust that percentage in that person's salary. I want to know in what components of the person's salary they would be adjusting this raise of 20%.

Can anyone help?

:roll:

I am not sure if I understand the question correctly; however, if you are trying to hire someone from another company, whether a competitor or another company, who has a great background and experience and ensure that they are on the "right foot" to join your company, then would you not consider their salary at their former company?

So, Mr. XYZ, who works for ABC Co., leaves to join 123Co. He joins that company within the salary structure of that company. Usually, one has a job band/width already established while recruiting, as to the salary, and the range is determined by the job description.

Experience, education, and industry-related experience are all taken into account to determine where in the range Mr. XYZ would fall into place.

Obviously, if you feel that you need to retain him - instead of doing a salary increase, would you not offer a signing bonus instead - with the restrictions of that? Otherwise, you might have some discrepancies with salary structure and compensation ranges across the board - and leveling issues.

Just some food for thought.

Cheers!

Rekha