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1. INTRODUCTION Human Res o urce Account i ng (HRA) means t o me a sure t he cost and value of the people (i.e. of employees and managers) i n t h e o r ganizat i o n . It m easures t he co s t i ncu r red t o recrui t , hire, train and develop employees and managers. HRA a l so fi n ds out t he pre s e n t ec o nomic va l ue o f i t s employees and managers. After measuring the cost and value o f it s emp l oye e s and manager s , t he o r ganizati o n prepares a repor t . T his re p ort i s c a lled HR A Report . It i s shown to the t op lev e l management . It can also b e shown t o the employees, managers and outside investors.

2. OBJE C T IV E S Providing cost value information about acquiring, developing, allocating and maintaining human resources. Enabling management to monitor the use of human resources. Finding depreciation or appreciation among human resources.

3. Assisting in developing effective management practices. Increasing managerial awareness of the value of human resources. For better human resource planning. For better decisions about people, based on improved information system. Assisting in effective utilization of manpower.

4. ADVANTAGES 1. Information for manpower planning HRA provides useful information about the cost and value of human resources. It shows the strengths and weakness of the human resources. All this information helps the managers in planning and making the right decisions about human resources. Thus, it provides useful information for Manpower Planning and Decision Making.

5. 2. Information for making personnel policies HRA provides useful information for making suitable personnel policies abou t p rom o t i on, f a vora b le worki n g environmen t , job sati s fa c ti o n of employees, etc. Utilization of human resources HRA hel p s the o r ganiz a ti o n t o ma k e the best ut i li z at i on o f hum a n resources. Proper placements HRA helps the o r ganiz a ti o n t o place the ri g ht man i n the r i g ht post depending on his skills and abilities.

6. 5. Increases morale and motivation HRA s h ows that the o r ga n iza t ion c a res abo u t the e mp l oyees a n d their welfare. This increases their morale and it motivates them to work hard and achieve the objectives of the organization. Attracts best human resources Only re p uted o r g aniz a tions condu c t HRA. S o , comp e te n t and c a pable people want t o jo i n the s e o r ganiz a ti o n s . Therefore, i t a ttr ac ts the best employees and managers to the organization. Designing training and development programs HRA hel p s the o r ganiz a ti o n t o design ( m a ke ) a su i ta b le t r a ining and development program for its employees and managers.

7. 8. Valuable information to investors HRA provides valuable information to present and future investors. They can use this information to select the best company for investing their money.

8. Limitations There is no proper clear-cut and specific procedure or guidelines for finding cost and value of human resources of an organization. The systems which are being adopted have certain drawbacks. The period of existence of human resource is uncertain and hence valuing them under uncertainty in future seems to be unrealistic. There is a fear that HRA may dehumanize and manipulate employees .

9. COST OF HUMAN RESOURCES Acquisition Cost Training and Development Cost Welfare Cost Other Cost

10. ACQUISITION COST I t refers t o the c ost incur r ed i n ac q uiring the r i g h t man for the right job at the right time in a right quantity. a) Recrui t ment Cos t: - ex: cost of recruiting material, administrative expenses, advertising costs, agency fees, recruiters salary and travel and outside cost.

11. Selection Cost:- ex: cost of application banks, administrative cost of processing applications, conducting tests and interviews, medical examinations and salaries. Placement Cost:- ex: depends upon the placement, individuals ability and attitude.

12. TRAINING & DEVELOPMENT COST It refers to the sacrifice that must be made to train a person either to provide expected level of performance or to enrich individuals skills. Formal Training Cost: Refers to the cost incurred in conventional training for the orientation of an individual. On the Job Training Cost: Once th e e m p l o y e e i s p l ac e d o n the job, h e m u st b e trained t o d o job efficiently and effectively.

13. C) Special Training Cost: T o achieve the perfor ma nce sta n dards so m e t i mes spe c ial training programmers may be devised.

14. d) Development Programs: Employees may be allowed to participate in development programs may range from ordinary lectures to international conferences and seminars. Involves cost such as delegated fees, travel cost, loss output etc.

15. WELFARE COST A vital function of an employer to provide an atmosphere to the employees to perform their work in healthy, congenial climate conducive to good health and high morale .

16. Welfare Amenities Within The Organization: ex: rest shelters and canteens, washing and bathing facilities, drinking water and occupational safety etc. Welfare Outside The Organization: ex: Social insurance measures, maternity benefits, medical facilities, educational facilities, housing, holiday homes and leave , travel facilities etc.

17. OTHER COSTS I n India, Factories Act 1948 has made s t a tut o ry prov i s i ons with regard to employees health, safety and welfare as follows: I. Health Of Workers: Cleanliness, disposal of waste and effluents Ventilation and temperature Dust and fumes Over crowding Lighting Drinking water Latrines and urinals

18. II . Safe t y Of W orke r s: Fencing of machinery Hoist and lifts Pressure plant Precaution against danger fumes . III.Welfare of Workers: Washing facilities Facilities for storing and drying clothing First aid appliances Canteens Welfare officers

19. METHODS OF VALUATION METHODS BASED ON COST METHODS BASED ON VALUE

20. COST BASED APP R O A CH E S

21. HISTORICAL COST APPROACH Brumnet, Flamholtz and Pyle have developed this method. It is on the basis of actual cost incurred on human resources. Such a cost may be of two types- acquisition cost and learning cost. Under this approach actual cost incurred towards recruitment, hiring, training and developing human resources of the organization are capitalized and amortized over the future expected useful life of the human resources. The historical cost of human resource is almost similar to the book value of the other physical assets.

22. VALUE BASED APPROACHES

23. THE LEV AND SCH W A R TZ AP P ROA C H This model has b een dev e loped by Lev and Schwartz ( 1971 ) . A c cordi n g to this model, the value of human resources is ascertained as follows – All employees are classified in specific groups according to their age and skill. Average annual earnings are determined for various ranges of age. The total earnings which each group will get upto retirement age are calculated. The total earnings calculated as above are discounted at the rate of cost of capital. The value thus arrived at will be the value of human resources/assets.