The Hindu Business Line : How to evaluate a job offer

Switching jobs is a crucial decision as it sets the pattern of job choices you make over the next couple of years. Topmost among the things one needs to consider before accepting a job offer is, of course, the pay package, though one should not ignore the growth prospects offered by the profile.

Higher food prices, spiralling rentals and spike in fuel costs, all end up raising the cost of living, especially in the cities. So, one needs to be smart when evaluating a pay-package. Know what your skills are worth and see if you are paid a commensurate amount.

The break-ups

CTC — an acronym often used in the job market — has to be looked at closely. The compensation on offer shown as CTC (cost to company) in the offer letter adds the maximum payable on allowances and variable incentives to the fixed component in arriving at the net pay.

Performance-based bonuses, e-sops, the company’s cost of training the recruit, mobile allowance, travel allowance and even the tea/coffee and lunch offered at the office are usually factored into the pay package, making it a really tempting figure. Caution! You might be misled! The take-home salary in reality could be very different — much lower than the CTC figure.

Here is a simple way to calculate your TH (Take-home):

Add: Basic, DA, CCA, HRA and fixed incentive/allowances (if any)

Deduct: Employees’ PF contribution, Tax

All other components are either performance-based and, therefore, variable or non-cash components. So, look for a material increase in the basic pay and make your decision on the offer accordingly.

Also, do look out for reimbursements in the offer letter. Medical and mobile allowances, when given as reimbursements, are eligible for income tax exemption. The perks offered by the company, including vehicle for your conveyance, etc., are taxable and not completely free of cost. And some companies do add the vehicle value (perks) in the CTC.

Also, check whether the incentives come under individual or group incentive plan. The higher proportion of performance-related pay in the CTC, compared to the fixed pay, will result in high performance pressure and leave you completely exhausted at the end of the month or quarter.

Do find out at what intervals the company has offered pay hikes in the past. History of consistent pay hikes by the company should be viewed as a positive.

Negotiate

Do not make your decision before you negotiate with the employer. One often sees substantial upward revision in the offer after negotiation. But, first, see if the package offered by the employer is at par with the industry. Research on the current (salary) trends in the market. Job consultants and friends working in the same sector could probably help you with information on the salary range offered in the industry. You can then bargain for a higher pay package by positioning your skills accordingly.

One can also get some leeway in negotiating on variable pay. An understanding of the performance metrics will allow you to better negotiate the performance-pay and be rewarded appropriately.

Highly skilled professionals could even look for a sign-on bonus with the new employer. Industry exposure, job skill and the individual’s expertise in the work field are what counts here.

So, the catchword is ‘negotiate’. But do also make an honest appraisal of your skills for the job before aggressively negotiating for a higher pay package.

Again, your job decides your destiny! So think carefully before you make a choice.

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