27 Feb 2016

Companies Should Quote Net Pay

Companies sometimes quote a salary package as a CTC (Cost to Company). This is irrelevant to me — I don’t care what a company spends on me; I care what I get. Quoting CTC should stop. Even in addition to quoting gross pay — it just muddies the waters, and confuses job-seekers, especially inexperienced ones like students.

Actually, companies should quote the net pay in addition to the gross pay. Emphasise the former. This would be done assuming no other income [1], and assuming the employee takes advantage of the ₹1.5 lac section 80C allowance [2], and no other benefit.

After all, net salary is the more important number to me — it’s what I receive in my bank account. Companies should also quote the gross salary because tax can change, but in addition to the net salary, which is a better indicator.

[1] The presence of which complicates the calculation because now a greater fraction of your income is being taxed at the highest rate, like 30.9%.

[2] Because there’s little reason not to.

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