It may be because they get allowances and perquisites from their employers. These boost their overall income, allowing them a greater degree of freedom to use their take-home pay as they see fit. While such added forms of compensation are not a part of their salary, they all count as cost to company – CTC – which is what their employer spends on them.
People often are unaware of the concept of the CTC. They simply understand their income to be their take-home salary along with any reimbursements and bonuses. This may not help ascertain the full extent of their CTC. A simple perk like a free cab pick-up service could potentially boost your monthly income by thousands of rupees every month, since you no longer have to spend that amount out of your own pocket.
Understanding such aspects of one’s compensation is especially important while negotiating a package at a new job. One must include all aspects of their CTC to arrive at a figure over which they should negotiate for a raise.
Let’s take a look at the several things that could potentially enhance the net value of your CTC.
PICK UP AND DROP: This may be a standard perk at many MNCs and IT companies, especially any company involving late-night work. Paying for your own commute to and from work may cost you thousands of rupees every month. This is also an expense which is subject to a great deal of volatility due to its link to fuel prices. If you’re using your own vehicle, you also need to take care of repairs and maintenance costs. If you’re using public transport, you are at the mercy of the whims of service providers. Hence having your employer provide you free transport allows you to save up on potentially thousands of rupees every month which you would have to otherwise pay from your own pocket.
If your company doesn’t provide you with a pick up and drop, here’s a way to save on fuel. Get a Fuel Credit Card!
FOOD: Food is a particularly difficult aspect of life to manage, especially for those people living away from their families. Cooking at home is an arduous task; eating out or ordering in is not only unwholesome with long-term health costs but also an expensive affair and can easily run up to hundreds of rupees a day. Therefore having your employer provide you food—or food coupons—at work could again potentially save you thousands of rupees a month—money that would otherwise spend from your own pocket. Food coupons help reduce your tax burden too.
EDUCATION: Higher education is expensive. An executive MBA could easily set you back by tens of lakhs of rupees in the open market. But if your employer is willing to spend on your education, it implies massive long-term gains. Not only will you be saving on your education costs, you would be reaping the benefits of your enhanced skill-set in the years to come.
Employer not willing to spend on your education? Check out the rates on some Education loans.
INSURANCE: This is possibly the most under-rated part of your compensation. A typical group health cover most employers offer covers the employee’s entire family of dependents. In retail, such a cover could be worth Rs. 5,000 to 10,000 for the insured, who may be a young person. But if he has parents in their fifties, their coverage could cost upwards of Rs. 20,000. This may not seem like much as an annual cost, but the coverage matters, especially since many young people view the premium costs of Health Insurance as a financial burden. However, a cover of Rs. 5,00,000 could prove invaluable in the case of sudden hospitalisation of the employee or any of his family members covered under the plan.
Additional Reading: Group Health Insurance vs Individual Health Insurance
BONUS: Bonuses may not just be a reward for high quality performance, but also a deal sweetener during a job offer negotiation. Often, employers would throw in a one-time joining bonus to prospective employees. Another point to be made about bonuses is that employers may tweak the terms and conditions of their bonus program, ensuring that only the best employees get full value of the bonus. Hence if you’re negotiating an offer, you must make an attempt to understand the terms of the bonus so that you’re not in for a rude shock during your appraisal.
Additional Reading: What to Do With Your Bonus Money
CONTRIBUTION TO PF, SUPER ANNUATION: A little contribution of a few hundred or a couple of thousand rupees a month towards your EPF or super-annuation may not feel like a serious money matter. But if you add up the total value of such contributions some employers make towards their employees’ funds, plus interest and compounding, we’re talking about tens of lakhs of rupees over a long career. The little payments matter a great deal.
VACATION DAYS: How about asking for a larger number of vacation days from your new employer? Having to work for fewer days in a year can imply higher earnings. For example, let’s assume you earn Rs. 4,00,000 annually and work for 230 days a year after deducting all weekends, most public holidays, and your annual quota of vacation leave of 20 days. Therefore you’re earning approximately Rs. 1,739 a day. What if you negotiated for 10 more vacation days as part of your package? Your per-day earnings would go up to Rs. 1,818. You could even use the vacation days to pay for your notice period when you eventually move on.
Additional Reading: How To Maximise Your Take-Home Pay
Now that you know how to evaluate your total pay, you’ll be in a better position to negotiate your salary when you receive a job offer. All the savings that you get will certainly come in handy, especially if you’re thinking about something like a down payment on a House or a Car. For the rest of the funding, there’s always BankBazaar.