amity global business (bangalore)

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

3. 
 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
Introduction

4. 
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
Contd…

5. 
 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
Objectives

6. 
 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
Importance of HRA

7. 
 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
Contd…

8. 
 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
Limitations

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

10. 
Measurements in HRA
•Historical Cost
•Replacement Cost
•Opportunity Cost
•Standard Cost
Cost 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)
Monetary value based approaches:
•Likert Model
•The Flamholtz Model
•Ogan Model (Certainity Equivalent Net Benefit Model)
Non- monetary value -based approaches:

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

12. 
 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
Types of Cost