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

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.

“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”

Rajesh Padmanabhan, HR leader & CEO, Talavvy

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.

“If the person’s market value is Rs 20 lakh, he will be enticed with up to Rs 25 lakh because the number of people with that skillset is less. These numbers are coming from the same reference point, which is the current compensation of the person. Hence, for an HR person, it is rather easy or practical to ask about the current compensation”

Paramjit Singh Nayyar, CHRO, Bharti AXA General

There is no consistent scientific way that is acceptable across industries and organisations, in terms of compensation evaluation. The unskilled, semi-skilled or skilled categories at the entry level have a standard compensation that everyone follows, but that happens because there is enough talent available. The moment one goes higher up the ladder to manager or supervisor level, talent becomes scarce. Therefore, CTC becomes the only reference point. A manager with the same role can have different pay in different organisations. How does one ascertain a candidate’s worth? Paramjit Singh Nayyar, CHRO, Bharti AXA General Insurance, points out that while it may not be the ideal way of doing things, it is the pragmatic route to follow.

Nayyar observes that India is a market where good talent is in short supply. At the entry level, many people apply for a job. However, for niche skills, one will find very few people. In an ideal situation, the person should see the skillsets of the candidate, and on the basis of the pay metrics in the organisation, decide what the market value of the person is. “However, in the Indian context, the market value of a person is very subjective and open-ended because of the paucity of talent. Every industry has several key players. So, there is a run for talent. If the person’s market value is Rs 20 lakh, he will be enticed with up to Rs 25 lakh because the number of people with that skillset is less. These numbers are coming from the same reference point, which is the current compensation of the person. Hence, for an HR person, it is rather easy or practical to ask about the current compensation,” explains Nayyar.

However, Dilip Pattnayak, president and CHRO, steel & corporate, JSW, believes that it is simply part of the information sought during an interview. A recruiter asks that question to assess if the person fits the salary range set by the organisation for that particular role. “I don’t think it makes any material difference to an interview in any way. I have never asked this question ever. If one asks such a question to evaluate a candidate, it is only to gauge whether the person fits the budget. Every job profile has a value attached to it, a range that one has to fit into.” He rightly points out that “it is the recruiter’s duty to ensure that the candidates fit the budget of the company before presenting them to the interview panel.”

“I have never asked a current CTC of a person in an interview. If one asks such a question to evaluate a candidate, it is only to gauge whether the person fits the budget”

Dilip Pattnayak, president and CHRO, steel & corporate, JSW

In case of government jobs, salary brackets or ranges are fixed. Several multinationals follow standard salary ranges pertaining to which level a person belongs to. However, there are always outliers to draw the right talent. High performers are often lured by the competition with the help of these outliers, which give organisations the power to stretch the budget further. Praveer Priyadarshi, HR consultant & HR leader explains, “Often job descriptions mention ‘compensation is not a constraint for the right candidate’. In such cases, it’s not the previous salary but the competence of the candidate which will determine the compensation.”

Government jobs, on the other hand, operate on a completely different salary structure. Priyadarshi explains that a person can remain in the same level for many years in a government department. “In the private sector, if a person has joined as a trainee, he will be elevated with time and at each level there is an elevation in salary as well.” Priyadarshi adds that the reason this question will stay is because in India, job descriptions aren’t even revealed properly. Several senior roles don’t mention the job description at all. So everybody does it the way they feel comfortable.

“In the private sector, if a person has joined as a trainee, he will be elevated with time and at each level there is an elevation in salary as well”

Praveer Priyadarshi, HR consultant & HR leader

To ask or not to ask about the current compensation of a candidate is, thus, subjective to the organisations with no set rules or parameters. However, clearly, this question will never be outdated or banned in the Indian context.