You are on page 1of 5


The total growth of the organization depends mainly on the skills of its employees and the services they render. Hence, the success of any organization is contingent on the quality of their Human Resource- its knowledge, skills, motivation and understanding of the organizational culture. Therefore, it is imperative that the humans be recognized as an integral part of the total worth of an organization.

Definition :
Human resource accounting (HRA) denotes just this process of quantification/measurement of the Human Resource. “Human Resource Accounting (HRA) is basically an information system that tells management what changes are occurring over time to the human resources of the business.

Objectives of HRA
 Provide cost value information about acquiring, development ,allocating and maintain HR  Enable management to effectively monitor the use of HR  Find whether human asset is appreciating or depreciating over a period of time  Assist in the development of effective management practices  To motivate individual persons in the organization to increase their worth by training  In planning physical resource vice-versa hr by giving valuable information

. OPPORTUNITY COST : A calculation of what would have been the returns If the money spend on HR was spend on something else.Advantages of HRA  Foresee the changes  Provides different methods of testing  Increase productivity  Brings high return  Helps individual employee to aspire  Provides scope for advancement  Throws light on the strength and weaknesses of the existing workforce Methods Of HRA  Cost approach  Economic value approach COST APPROACH IN HRA HISTORICAL COST : Is the sacrifice that is made to acquire and develop the resourse.

ECONOMIC VALUE APPROACH PRESENT VALUE OF FUTURE EARNINGS : value of an individual is the present worth of the services that he is likely to render to the organization in future COMPETITIVE BIDDING MODEL : an internal market for labor is developed and the value of the employees is determined by the managers. The highest bidder ‘wins’ the resource IND. Managers bid against each other for human resources already available within the organization. Limitations  Not easy to value human asset  Results in dehumanizing human resource  No evidence  Hr is full of measurement problem  Employees and unions may not like the ideas  Unrealistic .VALUE TO ORGANIZATION : This method helps in determining what an employee’s future contribution is worth today.REPLACEMENT COST : The cost that would have to be incurred if the present employees are to be replaced.

knowledge.86 billion  HRA is very essential for any knowledge intensive company  Slowly the concept gained importance and companies like satyam computers. Human resources was an intangible asset which involved capabilities. and even manufacturing firms like Reliance industries started adopting it  The assets could be classified into – tangibles and intangibles. skills. Lack of empirical evidence Assumptions Underlying HR Accounting  People are valuable organizational resource  Human resource value is influenced by management style  HRA information is needed HRA In Infosys  Infosys was the first software company to value its human resources in 1995-96  The company valued its human resources to Rs 1. and talents of the employees in the company .

 In HRA cost was assigned to every employee when recruited and revenue generated by him/her during the tenure in the company. .