The 1.x Crore Myth
Why the newspapers mess up the IIT Placement packages.
So once again newspapers have been going over and over and over again over how students have been offered ₹ 1.3 Crores ($ 210,000) or somewhere in that range for jobs at IITs. Sorry to bust the “bubbles” of any hopefuls, it is media hype.
Now let me just go into what a normal US Package at IITs look like, and every company company to IITs for CSE has stuck to this basic format, (but financial companies do present with opportunities for huge bonuses later on).
Base Salary (Cash components):
$100K — $120K
This is the total encashable components, it may include Housing and Transportation Allowance, both of which may be encashable only upto actual limits. Also look at the high tax rate given below applicable in California (~36%)
Joining + Relocation:
$10K — $20K
Yearly variable (includes performance and loyalty) Bonus :
$10K — $15K
Stock RSU :
$50K — $70K (or they may not offer it)
Stock RSU is actually paid over 4 years but included “completely” in the first year package. (Yes, 4 years of RSU in the package)
Non Cash Components:
$0K — $50K
Many companies don’t mention this in their CTC, but if mentioned it is not encashable, and only benefits like Health, and Dental Insurance, which every company has to take if they need to give you a job.
As you can see the $210K offer is somewhere in this whole thing. The joining bonus is a one time pay to take care of all your shifting (I am combining joining with relocation), while the performance bonus is performance dependent. At the core every company had a variation of only $20K in recurring cash component.
Now coming to the next biggest component Stock RSU (technically RSU alone since it stands for Restricted Stock Units), and the one that causes the most confusion.
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Most RSU’s have a “1 year cliff, 4 year vestation” policy. Now while you can look up the complete details on investopedia, in brief it is as follows, the RSU mentioned in the offer is usually over a period of 4 years, and that to sections of 10%, 15%, 25%, 50%. That is while you are given the stocks initially you get the ability to transfer them only during these 4 year periods.
This means that you get 50% of the said RSU at the end of 4 years ONLY. Given that the average period in a company is 3 years, it has to be seen as such. So that means whatever stock option you get divide it by 6 and this is what you can expect each year, NOT the whole amount mentioned in the offer.
(Note : There is a difference between ESOP and RSU, where the former is the option to buy stocks in a company later, which is for startups that haven’t gone public yet, while the later is usually for larger companies. I am also not sure on the difference, so do check up on them, but they also follow the 1-yr cliff, 4-yr vestation policy).
Now once that is take into consideration the package comes down to normal levels as $120K in cash per year and about $7.5K in stocks, and this is what you should judge the package by.
Also to note is that converting it straight off from $120K 120*62.5 is pointless since the following are the rough data that you can expect
Rent : $10-15K
Food : Varies depending on company policy, but a normal meal costs $8-$10.
Tax : ~36%
The newspapers avoid all of this information completely and just talk about the US x Conversion rate cost, which I find completely absurd.
