Demystifying the Fat Salary Packages

With the placement season fast approaching, the media is back with the hype around massive salary packages. White spaces in every newspaper seem to be filled with breaking news drawing a rosy picture of the placement scenario where IT companies (mostly MAANG) are offering hefty salaries to fresh graduates from top institutions.?

According to reports by different media houses, students from many top-tier institutions receive bulky packages of over Rs 1 Crore. Unfortunately, high salary packages have become synonymous with the quality and popularity of any Tech or Management institution in the country.?

But what is the reality behind these eight-figure salary offers? Let us take a reality check today.

Let us not hesitate to say directly that readers are being manoeuvred with misleading numbers. The salaries flashed onto newspaper headlines are typically dollar-denominated salaries, meaning that these are international packages and not domestic ones.

The first misinformation involves converting the dollar figure CTC to a rupee amount. The two currencies are not comparable as the dollar salary would not be earned in India but in a country with a substantially higher cost of living. The second distortion is to refrain from mentioning the underlying computations, such as bonuses, stock options etc.?

For instance, let’s assume a student received a 1 Crore annual package from one of the MNCs like Oracle, Google, Facebook, Goldman Sachs etc. Now, that one crore is CTC (Cost To Company), which is the total amount a company spends on a hired candidate.?

What we need to understand is this One Crore Rupees includes(just an illustration):

• Basic (including EPF, Taxes)- Approximately - 50 lakh
• Variable Component (Performance Bonus): 10 Lakh (Awarded Annually/Quarterly)
• One-time Joining Bonus - 10 lakh (Usually 50% is given at the time of joining and the rest of the 50% after you finish one year in the company)
• ESOPs - 30 lakh (Spread over four years with 25% vesting after you complete one year and the remaining vesting in equal proportion every quarter )

So, Base CTC is the main component that the candidate gets, which is not one time. It can be considered as the actual take-home salary for a candidate.

With the USD strengthening daily, the difference in living expenses between the Dollar and the Rupee is significantly bigger and thus, a substantial difference between the life that you will be living with 100$ vs 8200 INR due to the PPP difference.

For a better understanding, let us take an example of one of the leading electronic firms in Asia, which is based out of South Korea.

Of the 1 Crore Package, according to general market standards, close to 30% of the compensation will be a one-time thing and will be compensated to the candidate in stocks, and s/he cannot cash them for the first 2 years (from the date of joining.)

As we mentioned above, these are international packages, so let’s continue with our Korean example, 1 Rupee = 17.3 Korean Won, so your 1Cr Rs package becomes a 17.3Cr Won package. But the cost of living is just too much. A Pizza costs 20k-30k Won compared to 500-800 Rs in India.

Note that we are not saying that a candidate won’t lead a good life, he/she will lead a great life, but it’s probably similar to life of a candidate getting 25-28 Lac domestic package in India but with a good scope for development, better peers, and may be better opportunities overall.

Remember that cracking these opportunities itself is a big deal as getting placed in these figures, be it in Converted Indian Rupees or Dollars, is a tedious process, and only a small fraction of the top minds graduating from the top Institutions in India are able to grab it. Thus, celebration and kudos are a must for them, but a blind race behind these figures is what we would not want our youth to be a part of.

We want our youth to be aware and updated in terms of new-age skills and, thus, become industry relevant. The Institutions should offer these in-demand programs for the students so that their skill itself becomes their resume and hence, help them get good career opportunities in the Industry, within and outside the country.

upGrad Campus is a catalyst for the Institutions for this vision. Our Job-ready Certification Programs (JRCP) are short-term certifications that Institutes can offer to their students in emerging fields like Business Analytics, Digital Marketing, Data Science, AIML, Blockchain, etc. and help them hone their skills to get the desired placement.

Hence, next time you hear someone reading a 1 Crore Placement figure aloud in the newspaper, we hope you will be able to help them read between the lines, at least figuratively!