Offer Letter Red Flags: CLAUSES You Must Check

Summary

In this insightful video, Diksha Arora, an interview coach, guides job seekers on how to decode their offer letters, focusing on the hidden truths behind CTC and in-hand salary. She explains how large salary figures often conceal deductions like bonuses, PF, and taxes, leaving you with far less than expected. Diksha also highlights red flags in offer letters, such as unfair clauses on relocation, variable pay, service agreements, and notice periods. Finally, she shares professional tips on how to ask for changes to your offer letter without sounding demanding, ensuring a fair and transparent negotiation.

Takeaways

• 😀 Always break down your CTC into fixed salary, bonuses, and deductions before assuming your in-hand salary.
• 😀 A 10 LPA offer can often result in just 50-60K per month after deductions like taxes, PF, and bonuses.
• 😀 Don’t assume CTC means the same as your monthly salary — it's a common trap for new employees.
• 😀 When reviewing your offer letter, check for clauses on relocation, variable pay, and service bonds. These can significantly impact your experience.
• 😀 Always ask for clarification on relocation clauses. Understand if relocation is optional or mandatory and whether expenses will be reimbursed.
• 😀 Be cautious of variable pay clauses. They are often discretionary, and your bonus may not be guaranteed.
• 😀 Service agreements with penalties for early exit (one to two lakh) can be a trap. Make sure you’re getting real training in exchange for the bond.
• 😀 A 90-day notice period can be a major hurdle if you want to switch jobs. Always check if there’s an option for an early exit or buy-out.
• 😀 Be aware of termination clauses that favor the company more than you. Ensure that you’re protected in case of layoffs or sudden termination.
• 😀 Never hesitate to ask questions or negotiate terms in your offer letter. A polite and professional approach will ensure you're not seen as demanding.

Q & A

What does CTC (Cost to Company) actually represent in terms of in-hand salary?

CTC includes your total salary package, but not all of it is paid out as your in-hand salary. In the case of a 10 LPA offer, the in-hand salary could be around 50k-60k per month, after deductions like PF, taxes, bonuses, and other contributions.

Why is it important to break down the components of your CTC?

Understanding the breakdown of your CTC allows you to have a clear picture of your actual take-home salary and enables you to negotiate better, especially if your fixed salary component is lower compared to the overall CTC.

What is the main issue with 'variable pay' in offer letters?

Variable pay is performance-based and often not guaranteed. It may be subject to company, team, or individual performance, which means that even if you perform well, you may not receive the promised bonus if others or the company misses targets.

How can an employee protect themselves from being moved to another location under the terms of an offer letter?

Employees should clarify if relocation is mandatory or optional, whether relocation expenses will be reimbursed, and if there are any options to refuse relocation for personal reasons.

What is the potential issue with a long notice period (like 90 days) in an offer letter?

A 90-day notice period can make it harder to switch companies quickly if you decide to leave. Additionally, some companies may not allow you to buy out the notice period, leaving you stuck unless they accept the request.

What should you do if your offer letter includes a service agreement or bond?

Always ask for clarity on the training being provided and whether the bond is legally enforceable in your state. If the penalty for leaving early is too high or the training is not adequate, it may be worth negotiating or reconsidering the offer.

How can an employee approach the termination clause in their offer letter?

Employees should ask for clarification on the company's right to terminate employment, especially when the company has the right to let go of an employee in 30 days, but the employee is required to serve 90 days if they want to leave.

Why is it important to ask questions about unclear or vague offer letter clauses?

Asking questions helps ensure that you understand what you're agreeing to. It also shows that you're attentive and proactive, which can be seen positively by employers. It helps protect you from unexpected surprises later on.

How can an employee negotiate changes in their offer letter without sounding demanding?

Instead of demanding changes, frame your questions politely and professionally. For example, you can say, 'Could you help me understand this clause?' or 'Is there any flexibility regarding this term?' This approach makes the conversation collaborative rather than confrontational.

What should you do before signing an offer letter?

Before signing, read the offer letter carefully—both the salary details and the clauses. Highlight any vague or concerning terms, confirm details through email, and don't be afraid to ask for clarifications or adjustments if something feels off.