1. Submitted By :
Gaurav ( 12020241078)
Isha Gupta ( 12020241079)

2. Contents

 Introduction
 Objectives of HRA
 Importance of HRA
 Limitations
 Cost of Human Resources
 Measurements in HRA
 Cost Approach

3. Introduction

 Process of identifying and measuring data about
human resources and communicating this
information to interested parties
 Quantification of the economic value of the people in
an organization
 Measurement and reporting of the cost and value of
people in organizational resources : Flamholtz
 Art of valuing, recording and presenting
systematically the worth of human resources in the
books of account of an organization

4. Contd…

1. Valuation of human resources
2. Recording the valuation in the books of account
3. Disclosure of the information in the financial
statements of the business

5. Objectives

 Improve management by analyzing investment in
HR
 Consider people as its asset
 Attract and retain qualified people
 Profile the organization in financial terms
 To have an analysis of the human asset
 To aid in the development of management
principles, and proper decision making for the future

6. Importance of HRA

 Furnishes cost/value information for making management decisions about
acquiring, allocating, developing, and maintaining human resources in
order to attain cost-effectiveness
 Helps the management in the employment, locating and utilization of
human resources
 Helps in deciding the transfers, promotion, training and retrenchment of
human resources
 Assists in evaluating the expenditure incurred for imparting further
education and training in employees in terms of the benefits derived by
the firm

7. Contd…

 Management tool designed to assist senior management in
understanding the long term cost and benefit implications of
their HR decisions
 Helps in identifying the causes of high labour turnover at
various levels and taking preventive measures to contain it
 Helps in identifying improper or under-utilization of physical
assets or human resource or both
 Provides valuable information for persons interested in making
long term investment in the firm

8. Limitations

 No specific procedure for finding cost and value of
human resources of an organization
 Form and manner of including HRA value in the
financial statement is not clear
 Employee with a comparatively low value may feel
discouraged
 Tax laws do not recognize human beings as assets

9. Training (Development) Welfare Cost
cost
-Medical Expenditure
-Formal Training Cost
-Canteen Expenditure
-On the Job Training Cost
-Specific and General Allowances
-Special Training
-Children Welfare Expenses
-Development Programmes
-Other Welfare Expenditure
Acquisition cost Other Costs
-Safety Expenditure
-Recruitment Cost
-Ex-gratia
-Selection Cost
-Multi-trade incentives
-Placement Cost
-Campus Interview Cost
Cost of -Rewarding Suggestions
Human
Resources

10. Measurements in HRA

Cost based approaches:
•Historical Cost
•Replacement Cost
•Opportunity Cost
•Standard Cost
Monetary value based approaches:
•The Lev and Schwartz Model (Present value of future earnings method)
•The Eric Flamholtz Model (Reward Valuation method)
•Morse Model (Net Benefit Model)
Non- monetary value -based approaches:
•Likert Model
•The Flamholtz Model
•Ogan Model (Certainity Equivalent Net Benefit Model)

11. COST APPROACH

Cost
It is a sacrifice incurred to obtain some anticipated
benefit or service
Two portions :
Expense
Asset

12. Types of Cost

 Historical cost
Sacrifice that was made to acquire and develop the
resource
 Opportunity cost
Money to be spent on HR was spent on something else
 Replacement cost
Cost incurred in the replacement of present employees