HUMAN RESOURCE

MANAGEMENT & ACCOUNTING

CASE STUDY
How to select a employee on the basis of his profitability &
CTC?

Submitted To :- Submitted By :-
Dr. Vishakha Baheti Sudhanshu chourey
mam Navneet Lowanshi
Abhishek Mishra
 Case Study of ANS Motors ltd. :-
ANS Motors is one of the best automobile company in the world,
known for his quality of the cars. ANS Motors has 2 manufacturing
plant in India (Mumbai & Delhi). Mumbai manufacturing plant has
a vacant position for executive manager & the recruitment team has
selected two people for this position (Mr. Ramesh & Mr. Suresh) for
the executive manager. Mr. Ramesh demands minimum take home
salary is $ 2,00,000 & Mr. Suresh demands minimum take home
salary is $ 3,50,000. ANS Motors consider its human resources as the
most important resources of an organization. Why?, Because ANS
Motors believes that the success or failure of any organization is
depends on the standard of the people working there in.

The following information is provided to you about ANS Motor Ltd.

Capital & Reserves
Equity shares of $10 each of which $7.5 has been called up. 60,00,000
Equity shares in respect of which calls are in arrear @ $ 2.5 per $ 1,50,000
share.
General Reserve. $ 7,00,000
Profit & loss account (balance at beginning of the year). ($ 2,50,000)
Profit & loss for the year. ($ 18,000)
Industry Average Profitability. 10%
12% Debentures of $10 each. 60,000
ANS Motors ltd. is proposing to hire the services of Mr. Ramesh & Mr. Suresh to turn the
company around.
Minimum take home salary per month demanded by Mr. Ramesh. $ 2,00,000
Minimum take home salary per month demanded by Mr. Suresh. $ 3,50,000
Average income tax rate on salaries after considering the impact of 40%
$ 1,50,000 p.a. i.e. the exemption amount.
Provident fund contribution by employer per month. $ 25,250
Profit over & above target expected by hiring Mr. Ramesh. 13.50%
Profit over & above target expected by hiring Mr. Suresh. 10%
Note :-
1. PF contributions are tax exempt.
2. Take home salary is that remaining after employee’s contribution to PF @
$ 25,250 per month & after deduction of income-tax on salary.

Questions :-

1. Analyze the proposal & see whether it is worthwhile to employ Mr.

Ramesh & Mr. Suresh ?
2. Suggest the maximum emoluments that could be paid to him?
 Solution:-

Cost to company in employing Mr. Ramesh:-

Salary before tax ` 2,00,000 x 12 = 24,00,000 40,00,000*

0.60
3,03,000
Add: Employee’s PF contribution (25,250 x 12)

46,06,000

Add: Employer’s PF contribution (25,250 x 12) 3,03,000

46,06,000
 Cost to company in employing Mr. Suresh:-

Salary before tax ` 3,50,000 x 12 = 42,00,000 70,00,000*

0.60
3,03,000
Add: Employee’s PF contribution (25,250 x 12)

73,03,000

Add: Employer’s PF contribution (25,250 x 12) 3,03,000

76,06,000
Capital Base:-
`

Equity Share Capital paid up (60,00,000 shares of 7.5 each) 4,50,00,000

Less: Calls in arrears (1,50,000)

4,48,50,000

General Reserve 7,00,000

Profit & Loss A/c (balance) at the beginning of the year (2,50,000)

Loss for the year (18,000)

12% Debentures 6,00,000

Capital base 4,58,82,000

Target Profit 10% of capital base (4,58,82,000) 45,88,200

Profits achieved due to Mr. Ramesh 45,88,200 + 13.5% (45,88,200) 52,07,607

Answer:-

I. Maximum emoluments that can be paid to Mr. Ramesh = 52,07,607. Thus, the
company is advised to hire him as his CTC “46,06,000” is less than “52,07,607”.
II. Maximum emoluments that can be paid to Mr. Suresh = 50,47,020. Thus, the
company is advised not to hire him as his CTC “76,06,000” is less than
“50,47,020”.