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Why it makes business sense to know candidate’s current CTC

There’s yet to emerge a scientific way to ascertain a person’s worth without inquiring about their salary history

Source | | Moumita Bhattacharjee

When a ban was imposed in the US on enquiring about salary history during interviews, the move made quite the noise. Employers are prohibited from asking the question, ‘What was your last CTC or what is your current CTC?’ The question earlier used to determine the limit of compensation or how much an organisation should offer to the candidate. The ban was aimed at diminishing pay disparity. In the Indian context, however, asking about the last drawn CTC or the current one is as common as asking ‘Tell me about yourself’. It’s a usual practice to ascertain the offer based on what the person earned in the previous organisations, mostly because salaries are negotiable. There aren’t any set parameters to determine the same and it seems, that’s exactly the reason why inquiring about CTC during an interview isn’t going anywhere anytime soon.

Ideally, the CTC is a functional component of industry compensation levels for the role, company’s reference pay, demand-supply premium, individual potential and performance. It gives a fair idea of where the candidates are pegged comparatively and also how they have fared and progressed up the career performance value chain. Experience and skills add up too. CTC also becomes the base point on which a shift premium is provided depending upon the affordability to pay, based on industry and company parity levels. While some exceptions are made, by and large, the above is a time-tested methodology. The pay-mix is another important factor to be addressed for the role and it has to be blended right for base pay and variable mix.

Rajesh Padmanabhan, HR leader & CEO, Talavvy, believes compensation is a perfect legitimate topic in India and is here to stay. “Senior candidates are normally more comfortable revealing their CTC close to the offer stage. They do not like to spill it early in the discussions. A broad band consent can, however, be mentioned upfront to avoid any embarrassment in such cases,” he says firmly.

Padmanabhan also adds that compensation will always skew more in favour of top performers, differentiators and value creators. “Pay has to be differentiated and the top two to five per cent high-value creators have to be accelerated and kept right up there, and the company must keep this open culture. The philosophy that works is ‘pay for performance’ and growth for potential. Never reverse this,” Padmanabhan cautions.

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