$ perl -wE'
use utf8;
use CGI;
use Devel::Peek;
use Encode;
my $cgi = CGI->new;

my $test = decode_utf8 $cgi->param("test"); # <--- decode

Dump $test;
my $x = substr($test, 0, 1);
Dump $x;' "test=%C3%A4"
SV = PV(0x8872868) at 0x8777a80
  REFCNT = 1
  FLAGS = (PADMY,POK,pPOK,UTF8)
  PV = 0x8834e80 "\303\244"\0 [UTF8 "\x{e4}"]
  CUR = 2
  LEN = 4
SV = PV(0x8872858) at 0x8841818
  REFCNT = 1
  FLAGS = (POK,pPOK,UTF8)
  PV = 0x8834e90 "\303\244"\0 [UTF8 "\x{e4}"]
  CUR = 2
  LEN = 4