The great CTC conundrum – to reveal or not to reveal?

Debate on the topic of CTC (“cost to company”, for any non Indians reading this!) has abounded recently on Linked in. One recent post attracted thousands of views and comments, with people voicing very strong opinions.

The question seems simple enough – should a candidate be “forced” to reveal their current salary in order for a job offer to be made? OR should an offer be made on the basis of the “value” of that role to the company and internal benchmarking?

Although I like to think that my beliefs and my actions are very congruent, this is one area where I’m mindful of reality as well as business needs.

With my “idealist” head on, and as someone who believes that a person should be rewarded for their potential and performance, regardless of the ups and downs of their past, I believe that previous CTC is largely irrelevant. A career path is never a straight line, and can be more exciting to let it meander and accept interesting opportunities for reasons other than money. In fact, I took a 65% pay cut when I moved from client servicing into an HR role, because that was the budget they had for the role. I accepted it because I thought that HR sounded like an interesting move. It was a bit of an experiment, frankly. Had I obsessed about that huge drop in CTC reflecting my future market value, I would never have made the jump. As it happened, I turned out to be pretty good at the HR thing and my salary increased exponentially over coming years.

It’s also a habit to pay people according to their education and background. While I can understand that that makes sense for a new graduate or someone fresh out of business school, as time goes on, that degree (or lack of) shouldn’t be used as a way of deciding on a salary. A good education should help a person fast track naturally, as they are likely to be more competent, move fast, and be ready for new challenges earlier.

However here’s the thing. Paying people according to a role (and ideally above market value if you want to be really competitive) is really limited to companies at a certain stage of maturity. An established company with cash reserves, able to pay top of the market, can take the more “enlightened” approach of paying the “ideal” salary for a role, come what may. A start-up, smaller business, or even a company in growth mode may have to be more mindful of cash-flow, meeting business targets, and managing costs, and thus may need to negotiate harder. In a startup, candidates may even be offered salaries lower than their previous CTC, along with equity or even the promise of a raise down the line. The “ideal” scenario of paying what a role is “worth”, together with regular reviews to ensure that salary remains top of the market, is only really sustainable if you have deep pockets and a very solid business model.

My own approach is a bit of a mixture. I am mindful of the company’s position, and the requirement to deliver a personnel budget in line with a signed off plan. At the same time, I don’t look at a candidate’s resume and make judgements on what they are worth based on their background or education. Potential is as important as past. I also believe in being transparent about the budget for the role, as early on as possible with a candidate. It is pointless engaging a candidate earning 20K in conversations about a role for which you have a budget of 10K.

So as with all things, it comes down to judgement. “Current CTC” shouldn’t become an unnecessary shackle, but lets also be mindful of business reality and budgets available. And the more transparency and communication throughout the hiring process, the better.