Calculate your new CTC and percentage hike after a raise or job offer.
A hike is usually quoted on CTC, which is the least useful number for judging what changes in your life. A 20 per cent CTC increase does not mean 20 per cent more in your account. Part of the increase may go to employer provident fund contributions and gratuity provision, which never reach you monthly, and the portion that does reach you is taxed, often at a higher marginal rate if the rise pushes you into a new slab.
Two further adjustments are worth making before deciding whether an offer is good. A hike that merely matches inflation is flat in real terms — if prices rose six per cent and your pay rose six per cent, your purchasing power is unchanged. And comparing two offers requires comparing the same thing: net monthly pay, plus the cash value of anything genuinely usable to you, rather than headline CTC. Variable pay and joining bonuses deserve particular scepticism, since a CTC inflated by a performance-linked component is not guaranteed money and a one-time bonus flatters only the first year.
Because part of CTC is employer contributions that never enter your take-home, and the portion that does is taxed. If the increase crosses a slab boundary, the marginal rate on the extra is higher still.
Compare net monthly take-home, then add the cash value of benefits you would genuinely use. Headline CTC is not comparable across employers because its composition varies so much.
Not in real terms. If prices and pay rise by the same percentage your purchasing power is unchanged. A real raise is the amount by which the increase exceeds inflation.
With caution. Variable pay is contingent on performance and company results, so a CTC inflated by a large variable component is not guaranteed. Judge the offer on the fixed portion and treat variable as upside.