Flat World 2.0 : Time to find our 'extra' ?

Last night I had the opportunity to watch the 76 minute video - Thomas Friedman's lecture at Linkedin -on his latest book. It is actually a 35 minute talk-and followed by 40 minutes of Q&A. (Courtesy : the Linkedin Blog)

The  Master story teller summed up the change since the time he wrote his earlier book in 2004

When I said the world is flat, Facebook didn’t exist. Or for most people it didn’t exist.  Twitter was a sound.  The Cloud was in the sky. 4G was a parking place. LinkedIn was a prison. Applications were something you sent to college. And, for most people, Skype was a typo.

That all happened in the last seven years. And what it has done is taken the world from connected to hyper-connected. And that’s been a huge opportunity and a huge challenge.

To me, the takeaways from the lecture-was the description of the effect on the labour market or jobs-as we have moved away from just a 'connected world' to the 'hyperconnected' world!

Thanks to the combination of globalisation and IT revolution, he observed

- the 'routine work' -ie the ones that can be described by an algorithm -has been crushed. Several jobs simply don't exist any more!

-the game has risen for the 'non routine work'-the ones that call for critical reasoning & problem solving.

So much so -that every individual has to have a unique value creation proposition!

His mantra for us to take charge of our own career?

-  the need for each of us to have an internal OODA – Observe, Orient, Decide, Act – loop that is faster than that of our competition.

 -The critical importance of realizing that “average is over”; and, also that the economy of the future will reward individuals who deliver “extra” in their roles and “invent, re-invent, and re-engineer” the way they drive value out of their jobs

Well, are we preparing ourselves for the New World? 

Relocating to India: More a mindset!

For those of you -who haven't been following the thoughts shared by Brijesh Nair, who has been blogging very prolifically for years now, before and after returning to India-and settling down in Vellore-here is an interesting debate that he introduces us to!!

After I wrote “Read This if You Have Plans to Relocate to India from US Ever” I came across two articles – one written by Sumedh Mungee in New York Times and a reply to that by famous Indian writer Chetan Bhagat - that underlines what I wrote in my blog about "mindset" that is essential for those who are relocating to India. In the first article, Sumedh narrates why he could not adjust his life in India after his return from US and his reasons to return back to US in less than 3 years. Chetan Bhagat in this article recounts his experiences once he relocated to India and how he made India a better place to live for him and his family.

Here are few excerpts from the article of Sumedh Mungee

…after being away for eleven years (I grew up in Mumbai), I was prepared for Indiato feel less like home and more like the flight’s “Indian vegetarian meal”: visually familiar but viscerally alien.

Our daughter attended a preschool in Bangalore whose quality matched any in the Bay Area. Our three-bedroom flat in Defence Colony, Indiranagar, was so comfortable and so American-friendly that my friends called it the Green Zone.

Three months after our return, after a friend told me that his two children were sick with amoebiasis — he thought they got it from their maid — my wife and I designated a separate set of dinnerware for our maids. It’s more hygienic.

Within six months, I’d brusquely refused my driver an emergency loan of 500 rupees ($10) to attend his grandmother’s funeral. I’d learned my lesson after our previous driver scammed me into paying for his son’s broken leg (as it turned out, he had no son). It only encourages them to ask for more; besides, they’re all liars.

What does this tells you after reading all these? The author had the “mindset” of an American and is not ready to give up that “mindset” even after relocating to India. His mindset wanted everything American in India and failed miserably and has to go back to US.

Now some excerpts from Chetan Bhagat’s article

We had another set of two maids. One of them is another young girl, around 20 years old from a village in Ratnagiri. I told her she has to learn something. She chose English and found a set of classes near the house. Everyone opposed me again. I told her to go ahead anyway. She has joined classes. She has not run away. This morning she said to me in slow but perfect English “Bhaiya, would you like your breakfast”, smiled and I felt it was worth it.

In my house, nobody is allowed to call the maids servants. We call them helpers, the kids call them ‘Didi's’. There is no question of separate cutlery. They eat what we eat, and are paid enough that they can afford good clothes, soap and shampoo that the hygiene standards are at par with us.

My elder maid has kids in Bangalore. Every summer, we call them to our house to live with us. They play with my kids, with their toys. When we go to Bangalore, my kids spend a day in her house. They haven’t fallen sick because of it. Whenever she wants leave, if it is reasonable, we send her home. Every week, both maids have a day off. Every Diwali, we give them a bonus and a raise, given the high inflation rates. This year, I had a new book which did well, hence the bonus will be bigger.

Now Chetan Bhagat came back to India from Hong Kong with the “mindset” to live like an Indian in India and also to put into practice some good things he learned abroad. One needs to have a “mindset” like Chetan Bhagat if you have to successfully relocate to India. Otherwise you will be like Sumedh Mungee and in no time will be in an Indian airport to catch a flight back to US.

So what are your thoughts after reading both the articles?

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5 things returning NRIs should know about salaries in India

Here is the second part of the article by Deepa Venkatraghvan who blogs on Economic Times.

In the previous article we saw what kind of salaries NRIs returning to India from the US could expect. Broadly, you could expect 40-70% of your US salary as your salary in India. The next step is to understand what exactly salary means.

Salaries in India are quoted in terms of CTC or cost to company. CTC is nothing but the cost that the company incurs to employ you and keep you employed. It includes your pay and anything else that the company may incur to keep you in employment. It's important because a lot of components of your CTC may not translate into actual take-home cash every month. Says Kris Lakshmikanth, Founder CEO of The Head Hunters India Pvt Ltd, "As a broad thumb rule, what you get in hand will be 70% of your CTC. So if your annual CTC is Rs 50 lakh, you can expect to get an annual take home of 35 lakh or Rs 2.9 lakh per month."

So what happens to the difference? That's one question we will try to answer today. The next is, there are many components that are offered in addition to the CTC, ESOPs being a good case in point. So what are the things you need to look at there? Let's take a look.

1. Certain components of CTC may not be cash components

A company may beef-up your CTC with components that don't really translate into month-end cash or that may have just a notional components. Some examples include:

-Value of perquisites is included in CTC. So if you are provided with a company accommodation, car, driver, child education expenses and so on, the value of these get included in the CTC.

-Banks may include interest subsidies in CTC. That is, if you are a bank employee, you are entitled to a discounted rate on loans. The difference between the market rate and the discounted rate maybe considered part of your CTC. Even corporate give out loans and advances at subsidized interest rates and the subsidy would be added to the CTC.

-Companies may include the cost of group medical or life insurance. Some companies may add food subsidies, that is, you may be getting a subsidy on your lunch in the office canteen. If you carry your lunch from home, you may not actually benefit from this component. Similarly, if the company provides transport, there maybe transport costs or subsidies.

-Companies include gratuity in the CTC. Gratuity is a sort of bonus that is paid out when you resign or retire from your company. The catch: You are entitled to gratuity only after completing 5 years in the company.

-Employer's contribution to your provident fund is included in CTC. This amount is deposited by the employer in your provident fund and so this does not form part of your take-home. You will get this amount only at the time you resign or retire.

"Ask to see the cash-in-hand figure. That will give you a good idea of what you will get," advises Aseem Juneja, Country Manager - India at US based executive search firm ZRG Partners.

2. Deductions further reduce monthly take home

Even after you have arrived at the cash value of your take home, there are certain deductions made from it. Tax is one such deduction. It is nothing but the taxes withheld from your income by the company. It is the equivalent of 'withholding tax' that several countries have. How much tax is deducted depends on the various components of your salary. This guide should help you understand.

In addition to income tax deduction, you will find a professional tax deduction being made every month.

"A lot of companies may allow you to choose the components in your salary. For instance, they may allocate a certain amount as a 'flexi pay' component. Within this amount, you maybe able to choose components such as HRA, medical reimbursement, etc depending on what maybe most tax efficient for you. If you are in a higher income bracket, it would be wise to consult a professional to help you optimize your salary to make it tax effective," advises Lakshmikanth.

The other deduction is your contribution to provident fund. This amount is deducted from your monthly salary and deposited in the provident fund. This is your contribution and comes out of your monthly salary, thus reducing your take-home. Again, a lot of companies make this deduction optional. However, making provident fund contributions maybe a wise saving tool. Currently company provident funds earn tax free returns of 8.5% per annum. Over a long period of time, that would build up to a decent corpus.

3. Annualised and variable components

There are certain components that are paid out to you annually or subject to your performance; these do not become part of your monthly take home. Examples include leave travel allowance, annual bonus etc.

"Variable salaries can range between 15-50%," Lakshmikanth says, adding, "For programmers the variable pay would be around 15% of the CTC while for marketing professionals it could go up to 50%. Before the 2008 crisis, most companies paid out the variable components in full, but that has changed now. There are various factors that come into play while arriving at the variable pay outs. The company's performance as well as your individual performance would both matter."

4. Understand what your ESOP consists of

Employee Stock Option Plans or ESOPs are given out over and above the CTC. The company gives employees an option to purchase stocks at a certain future date at a discounted price. As the value of the company scrip increases, the employee stands to earn capital gains. "When a company offers ESOPs, the CTC part of the compensation maybe a little lower," Lakshmikanth explains.

While ESOPs might seem attractive when the company HR presents the numbers to you, it is important to look into the fine print. Says Juneja, "There are a number of issues here. Firstly, people do not realize that there is a certain vesting period for ESOPs. That is, you will be eligible to exercise the ESOP only after working in the company for a certain period, say 2 years or so. The second issue is the strike price. This is the price at which the ESOP is granted. If the market price at the time of exercising the ESOP is lower than the strike price, there is really no gain. And that has happened many times in the past."

So is there room for negotiation? "There is always a 10% room for negotiation in any component of your salary," Juneja says adding, "So you might ask the employer to reduce the variable component by 10% or the value of ESOPs by 10% and increase the cash component by 10%. It's worth giving a shot."

5. Don't forget to negotiate a relocation package

"It's very common for senior executives to forget to negotiate a relocation package," says Juneja. "Relocating to another country, even if it is India, especially with a family in tow can be an expensive affair. You might get a few weeks of accommodation. Sometimes that time may not be enough. So negotiate a package before-hand. For instance, make sure the relocation package includes important things like getting a real estate agent through the company. That way, the likelihood of bumping into rogue agents is less," he adds.

(The author is a chartered accountant and financial writer. She also blogs at blogs.economictimes )