Whether it is a first job or a change in job, analysing the Cost-to-Company (CTC) breakup is crucial because the take-home salary per month can differ significantly from the CTC. There are two large components in the CTC breakup format -fixed and variable.

Fixed Component This includes basic salary, dearness allowance, House Rent Allowance , Leave Travel Allowance , conveyance allowance, reimbursements, Provident Fund and gratuity. The Provident Fund contribution is deposited in your EPF account every month and can be withdrawn 2 months after you quit the job. Gratuity contribution is also deducted every month but is given to the employee after 5 years of service. Reimbursements could or could not be in a separate account and don’t add up to your income. The rest of the salary breakup details are your actual fixed salary. Focus on them, to begin with.

Variable Component Variable component of CTC breakup format includes annual bonus and performance bonus. Annual bonus amount depends on your and the company’s performance. Performance bonus typically depends on your performance and is decided by your manager.

Negotiable terms  If there is a situation involving two job offers from two different companies with a similar CTC, it is essential to examine both and negotiate on specific terms to make a decision. The points of negotiation and evaluation could be:

• Some organisations have specialisation pay or the like to reduce the basic salary and thus the in-hand salary. However, higher the basic salary, higher is the EPF contribution, and a higher gratuity as well. These are the aspects to be kept in mind while evaluating the salary breakup details for basic salary amount.
• There is a reimbursement component as well, which won’t be a part of take-home salary per month, because it is usually maintained in a separate account. This includes reimbursements of food, travel, and other expenses incurred while working for the company. These are tax-free, so it is ultimately beneficial even if not added to the take-home salary per month.
• Variable pay is negotiable. Once you receive your salary breakup details, you can negotiate to get it converted into joining bonus, for example. If you are confident about your and the company’s performances, go for a higher variable instead as it will increase your take-home salary.
• CTC breakup format also includes benefits like insurance. Check the terms of these benefits. If they do not appeal to you, you might be better off receiving that money and getting a suitable insurance policy yourself.