In today’s job market, a common yet outdated practice persists—offering candidates a salary hike based on their last drawn CTC (Cost to Company). While this approach may seem logical from an employer’s perspective, it often undervalues skilled professionals and creates income disparity. Instead, salary should be determined based on a candidate’s expertise, experience, and the value they bring to the organization.

The Problem with the Last CTC-Based Salary Model

1. It Penalizes Low-Paid Employees

Many professionals start their careers at lower salaries due to various reasons—lack of negotiation skills, economic conditions, or unfair pay practices in their previous jobs. If future salaries are always based on past earnings, these individuals remain underpaid despite gaining significant experience and skills.

2. Discourages Career Growth and Transitions

Candidates who switch industries or upskill themselves often struggle to get fair compensation. If employers only consider last CTC rather than newly acquired skills, individuals making career shifts are forced to accept lower-than-market salaries.

3. Creates Wage Disparity

Two employees with similar skills and experience may end up earning drastically different salaries simply because one had a higher last CTC. This leads to unfair pay gaps within organizations, causing dissatisfaction among employees.

4. Ignores Market Trends

The job market is dynamic, with demand for certain skills increasing rapidly. Offering salaries based on outdated CTCs fails to reflect the current market value of a candidate’s expertise, making it difficult for companies to attract top talent.

The Right Approach: Pay Based on Skills and Experience

To create a fair and competitive hiring process, companies should:

1. Conduct Market Research

Employers should benchmark salaries based on industry standards and market demand for specific skills, ensuring that compensation aligns with the true value of a candidate.

2. Assess Skills, Not Just CTC

A candidate’s compensation should be determined by their technical expertise, problem-solving abilities, and relevant work experience rather than their previous paycheck. Skill assessments, case studies, and project-based interviews can help measure a candidate’s real capabilities.

3. Encourage Fair Pay Practices

Organizations should focus on equal pay for equal work, ensuring that employees with similar skills and experience are paid fairly, regardless of their last-drawn salary.

4. Support Career Transitions

Employers should recognize candidates who have upskilled or switched fields and pay them based on their new expertise rather than their past salaries in unrelated roles.

Conclusion

Basing salaries on last CTC is an outdated and unfair practice that limits growth opportunities for talented professionals. Instead, companies should adopt a fair, skill-based compensation model that values expertise and market demand. This shift will not only benefit employees but also help organizations attract and retain top talent in an increasingly competitive job market.