Introduction
Human resource accounting (HRA) is the practice of recording, analysing and reporting costs of a business’s human resources. This accounting practice focuses on financially-relevant aspects such as the cost of recruitment and training of staff, employee benefits and the cost of leaving employees. It is a financial assessment of individuals and is designed to help produce more successful results in terms of personnel.
History of Human Resource Accounting
The roots of HRA date back to the 1970s when the United States tried to intercept the labour costs of their employees, which was not considered when measuring their profits. In 1978, the US Office of Management and Budget made a Circular A-11 which stated that human resource accounting should be addressed.
Benefits of Human Resource Accounting
Human resource accounting is becoming increasingly important as businesses are becoming more concerned about their employee costs. It allows for the tracking of employee costs as well as the costs associated with employing staff. This allows for more accurate budgeting, better financial planning and improved decision-making. Additionally, human resource accounting is being used to track and assess the value of personnel. This is enabling businesses to compare and contrast the relative worth of currently hired individuals and prospective staff, allowing them to make better hiring decisions.
Objectives of Human Resource Accounting
The primary objective of HRA is to provide financial information about the value of staff to the organization. This information can be used to form budgets, create training plans and evaluate staff performance. HRA also serves as a valuable tool for businesses to measure the costs associated with the hiring, training and retention of personnel. This helps businesses identify areas of weaknesses and take corrective actions to ensure costs and performance are maintained at an acceptable level.
HRA Techniques and Methodologies
Human resource accounting is typically done using a variety of techniques, such as bookkeeping and activity-based costing. These techniques allow businesses to identify the costs associated with hiring, training and retaining personnel. Additionally, HRA can be done through audits to determine the accuracy of employee performance and cost data. Furthermore, businesses can use surveys to measure employee satisfaction and performance.
Conclusion
Human resource accounting is an essential tool for businesses to measure and manage their human resources. It allows for accurate budgeting, financial planning and decision-making concerning personnel. Additionally, it helps to identify areas of weaknesses and guide businesses in creating productive and efficient workforces. With its numerous benefits, human resource accounting is becoming an increasingly popular method of assessing employee value and managing personnel costs.
