Objectives Of Human Resource Accounting

Objectives Of Human Resource Accounting

Human Resource Accounting (HRA) is a bunch of accounting methods that aim to resolve and express the management of a company’s employee. It spotlights the employees’ competence, education and the remuneration. Human Resource Accounting promotes the description of investments in employees, thus enabling the design of Human Resource Management systems to follow and evaluate the consequences of various HR management Principles.

The major objectives of Human Resource Accounting (HRA) are to increase the transparency of Human Resource costs, investments and to improve the bases for investors and company valuation. There are four basic HRA models which are described in short, below-

Four basic models of Human Resource Accounting (HRA) :

(1) The estimated financial value of the Employee to the organization. This value is dependent on two factors; the employee’s productivity and satisfaction of being an employee in the organization.

(2) The financial value of the group-describing the link between motivation and organization on one side and financial results on the other. This HRA model does not measure real value but concepts like motivation and welfare. Under this HRA model, measurement of employee satisfaction is given more importance.

(3) Replacement costs relating to Employee, describing the financial situation linked with recruitment, reduction and redeployment of employees. This HRA model emphasizes on replacement costs related the expenses connected to employee hiring, training and separation. Hiring covers expenses for recruitment, advertising etc. Training includes education, job training etc. Separation costs covers lost production when a person leaves a job. This HRA model can be used to describe the development of costs linked with replacements. In many companies, such replacement costs are included in accounts as an expression of employee value to the organization.

(4) Human Resource Accounting and balancing as complete accounts for HR area. This HRA model focuses on cost control, capitalization of the historical expenses. One impact of such a system is the visualization of inexpedient HR management routines.

Objectives Of Human Resource Accounting

The basic objectives of Human Resource Accounting (HRA) are many. Two of them are given, here.

Firstly, HRA escalates the management of HR from an organizational perspective through increasing the transparency of HR costs, investments and outcomes in traditional financial statements.

Secondly, Human Resource Accounting tries to improve the bases for investors and company valuation.

Unfortunately, for some reasons, the accuracy of Human Resource Accounting (HRA) is often called into suspicion.

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