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Points involved in the Negotiation of Salary
I am writing here to the point article on Negotiation of Salary to understand in a better way.
What are the criteria on which the compensation / salary is structured?
The salary is always based on,
- Your Qualification.
- Your Experience in the Job title for which You applied.
- Your designation in the previous organisation / company.
- Your last drawn salary in the previous organization.
- The most important part is, your Age – Qualification – current Salary (3-way match) should be a reasonable match.
- The Main part is Salary Components. Let’s discuss..
Salary Components :
Salary components are the part of salary structure. Click here for the Salary Structure.
Divide your salary in 3 Parts.
In the negotiation of salary, it is important to understand that, the Taxes are your cost and you have to bear it.
# 1st Part – Fixed Salary :
This consists of Basic Pay + All other Allowances and Taxable components + Food coupons (some companies give coupons up to the limit of non-taxable in the hands of employees). This is the most important in the Negotiation of Salary.
# 2nd Part – Variable Pay
This consists of Performance Bonus + Commission + any other component linked to our performance / target etc.
# 3rd Part (A) – CTC, i.e. Cost to Company.
Along with the above 2, this includes non-monetary benefits given to employees. viz. employee insurance, employee transport facility, food facility provided in the company (excluding food coupons), and any other non-monitory benefits.
# 3rd Part (B) – Gratuity
Some companies show the Gratuity amount also calculated & shown in the CTC (Cost to Company). This is a statutory liability of the company which is payable after an employee completes 5 years of service.
Conclusion :
In Negotiation of Salary, always concentrate on the 1st part of the Salary structure. i.e. always discuss the Fixed Pay / part of your salary. This is what you get in your hand. (I am not considering the TDS here, because it is your liability and you have to bear it). It is also called Salary in Hand.
The 2nd Part is regarding Variable pay. You will get the Annual Bonus also called a performance Bonus as per company policy. You can refer article on Weekly Pay on why the Bonus is paid to employees.
The 3rd part is added in your offer letter just to show, how much an employer is incurring the cost of hiring you. And always employer will consider this for his cash outgo to calculate the profit by hiring you.
