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Take home salaries dip by 30% over last 10 years…What? How? Why?

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That headline must have surprised you, especially because it is a known factor that India Inc. is shelling out much fatter pay packages than it did 10 years back. Infact, even a salary 20k p.m for a middle class is considered to be below par by many.

Then how does one justify 30% dip in take home salaries?

It is actually quite simple, and few of you probably might have guessed it already – Even though we have higher salaries, there is too much of a pay cut as compared to 10 years back – and hence this dip of 30%.

Let me back this up by some numbers that were revealed by the survey conducted by ASSOCHAM.

The main culprit offcourse is the BIG housing loan – The survey revealed that take home salary of average employee in metros and large townships has gone down 30% in last 10 years which used to be over 70% around 1999 and now stands around 40% due to increasing  burden of EMI’s on housing, auto & luxurious items and life insurance premiums.

In an average salaries structure of Rs. 25,000 per month , the take home part is not more than Rs. 10,000 as average employee sells out over Rs. 6,000 on housing loan, 5,000 loan on cars & autos, Rs. 1,500/ – on luxuries item.

But, what I think is very surprising as well as heartening is that, people are also paying Insurance premiums of nearly 2,500 each month that constitutes 10% of their salary.

This I think is excellent, because, if something happens to them, atleast their families will not have burden of paying big loans and will be covered by Insurance money.

Some other key findings of the survey:

  • Nearly 30% of employees said that they sell out between Rs. 4,000 to 5,000 in honouring the office loan advance on various petty activities such as construction, on education, marriage in relation.
  • 50% of the respondents said that their take home currently is not more than 40% of their total package and left over amount of 10,000 is spent for food, commuting costs, utilities, doctor  and education bills.
  • In the last 9 years, the salary of common man has gone up by 30% but on the other side the take home salary has come down by as many percentage points.
  • 80% of the respondent mentioned that median home price in the largest metropolitan areas have increased by 100% and the owner would need to earn double the home price to afford it.
  • 70% of the respondent said that the premium insurance cannot afford to skip due to policy cover will cease to exist
  • 42% said that they borrow within their means and thus even after paying the EMI rate of 40-50 per cent of income
  • The median household income has risen from 10,000 in 2000 to 25,000 in 2009
  • 65% of Single working professional quoted that working in a private firm in metro and buying a flat is difficult. They prefer to live on rent for a quarter of what they would have to pay as EMI.
  1. Sumedh says

    Yup…I agree with Sriram…take home is a wrong usage of words…

    basically, as the economy is booming, people are bullish and spending a lot more…these days everyone buys a flat before they reach 30…which was rare 15 years ago…

    1. Sriram Vadlamani says

      And you know who should be blamed for that? Banks. They chase the IT guys for loans as the market was booming.

      Not that I need them but I don’t receive as many calls from them.

      Also, you forgot to mention that Honda Civic they own.

  2. Sriram Vadlamani says

    The title is a little misleading in the report itself. Take home in the corporate world has a different meaning. I

    t is the Cost to Company – taxes+PF+Cess.

    The take home mentioned in the article is how much does the employee takes back to home. That is

    Take Home from above minus (EMI’s + Utilities + Luxuries etc..)

    The simiplest thing would have been – Savings.
    What say?

    1. Arun Prabhudesai says

      Nah Sriram, Its not really misleading..I will tell you why – Majority of guys take loans from schemes available with their companies – So the actual loan premium is deducted at source of employer – I think that is the case here and hence the take home salary term might just be correct :)

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