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Submitted By :Gaurav ( 12020241078)Isha Gupta ( 12020241079)
Contents Introduction Objectives of HRA Importance of HRA Limitations Cost of Human Resources Measurements in HRA Cost Approach
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
Contd… 1. Valuation of human resources2. Recording the valuation in the books of account3. Disclosure of the information in the financial statements of the business
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
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
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
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
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
Measurements in HRA Cost based approaches:•Historical Cost•Replacement Cost•Opportunity Cost•Standard CostMonetary 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)
COST APPROACH CostIt is a sacrifice incurred to obtain some anticipatedbenefit or serviceTwo portions :ExpenseAsset
Types of Cost Historical costSacrifice that was made to acquire and develop theresource Opportunity costMoney to be spent on HR was spent on something else Replacement costCost incurred in the replacement of present employees