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Project on hr economics

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PROJECT ON HR ECONOMICS

PROJECT ON HR ECONOMICS

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  • 1. PROJECT ON HR ECONOMICS By Aegidius Savio Mondol Chandrakant Ezong Paromik Das Paromita Ghosh Prakash Jhawar Pousali Mukherjee
  • 2. INTRODUCTION In the world of competitive business market the concept of Human Resource has been gaining popularity day by day as because every business house in this global market seeks to get the best kind of employment in respect of working force for managing the huge workload in different fields of business houses. This introduction of the workforce into a corporate business house needs a proper economic channelization that is the appointments of this workforce needs to be well justified related to companies profiteering motive and at the same time the best kind of service available with the force .This brings the subject of HR Economics for better understandability. Moreover, Human resource helps directly to remove the economic backwardness. It increases labor efficiency and specialization. It increases labor mobility from which the executing resources can be made more productive. The development of human resources increases the knowledge of natural resources. New production technique, market and opportunities of economic activities. The human resource also helps in the proper utilization of imported capital. These all lead to the increase in production, employment opportunities and levels of living of people. Human resource economics is a term that is used to describe the collective strategies and approaches that seek to address the utilization of labor within the workforce and how that utilization has an impact on the greater economic well-being of a nation or other locality. Typically, this type of economics considers the impact of employee turnover, unemployment, and even the role of labor unions and governmental policies on the efficient utilization of human resources. The general idea of human resource economics is to understand factors that interact
  • 3. to help grow and sustain the use of labor within the workplace to the mutual benefit of the employer and the employee, while also measuring the impact of that relationship on the economy in general. Using human resource economics in terms of function within a company usually involves attempting to match the skills sets required for a particular job position with the abilities of a specific employee. This process calls for evaluating the talents of the employee, relating them to the work available and determining if both the employer and the employee will benefit from the placement. In the best possible scenario, the employee is happy and looks forward to coming to work, taking pleasure in what is accomplished during the workday. At the same time, the employer is satisfied with the productivity of the employee and there is no need to spend time, money, and effort attempting to replace that employees people want. Compensation is frequently directly tied to the labor market. When certain workers are in short supply, offering higher compensation may increase the number of persons hired. When the economy is slower more people are happy to have a pay cheque. Since compensation, wages salary, incentives are always required to be paid by the company and thus these factors are controlled by HR, directly depend on the finance and corporate economic policy.
  • 4. THEORETICAL BACKGROUND Human resource or HR as we commonly know has been redirected due to economic expansion; the fast technological changes and the ways systems appreciate and use resources in the work place. In 1970’s and 1980’s and even early 1990’s the training component of Human Resource was primarily centered on providing with basic knowledge and expertise to perform their jobs. A larger scale, human resource economics will often focus on assessing employment issues that impact the greater economy. This can mean addressing issues of unemployment in one or more industries, and how those figures impact consumer spending and general stimulation of the economy. Attention to the impact of employment laws, whether positive or negative, is also part of this process. Even the role of unions in protecting the rights of employees and how those regulations impact the ability of employers to sustain a business operation over the long term are considered as part of the economic aspects of human resources strategies and initiatives. The scope of human resource economics seeks to understand and manage the effective usage of labour so that all parties involved benefit. This means job placement that meets the needs of both employee and employer, while also providing opportunities for growth that benefits both parties in the future. From there, the impact of those efforts on the stability of the economy are taken into consideration, which in turn helps to enact legislation that amends current labour practices or possibly paves the way for implementation of new practices that ultimately benefit everyone involved with that economy.
  • 5. INDUSTRY EXAMPLES From the above discussion we can infer human resource and economics are related to each other. They go hand in hand. We can explain it more vividly with some relevant examples. Now before we give some examples, let us discuss some basic concepts of economics that is Boom and Recession. An economic boom occurs when real GDP grows faster than the trend rate of economic growth. In a boom aggregate demand is high. Typically, businesses respond to this by increasing production and employment and they may also opt to widen profit margins by raising prices. In economics, a recession is a business cycle contraction, a general slowdown in economic activity. Macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business profits, and inflation fall, unemployment rate rise. In order to show how HR economics leaves an impact on different industries we may take an example of the BPO industry.HR plays a key role in the development and execution of the business strategy of a BPO where the entire business is people centric. The major challenge faced by a HR manager relates to retention of employees. Various estimates suggests that the average time to profit time for a new hire in BPO industry is about nine months suggesting that a fresher begins to break even the investments made on him or her and earn profit for the firm only after nine months. Attrition rate varies between 40 % and 50 %. During recession fewer employees are jumping jobs in the BPO industry,. As a result, attrition rates (the number of people quitting per 100 employees) for several listed BPO firms have come down by 5-13 percentage points on a sequential basis.Genpact’s employee attrition rate for the quarter, measured from day one of employment was down by 5 percentage points to 21 per cent from 26 per cent in the preceding quarter and 24 per cent for January-March 2008. If the attrition rate, were to be measured after employees completing six months of employment (as many of its competitors do), Genpact’s attrition rate would be 18 per cent. Another example we may give is the car manufacturing industry where HR plays an important role. This kind of industry employs labor from the locality thus providing employment to the
  • 6. localities helping the economy of the particular state to grow. Also it might be economic to hire localities because it is more costlier to bring labour from other states as it will include transportation cost and residential cost. And socio political issue may arise as the locals may raise objection due to the fact that the industry is not helping them to get jobs, infact their jobs are being taken up by “outsiders”. This may put pressure on the ruling party to please their vote banks and put pressure on the manufacturer to change their company policy. There are a number of incentives, tax policy considerations, microeconomic principles and theories, as well as human resources strategy issues that affect the employer’s decision to offer benefits. These factors also impact how the benefits should be designed and funded. In this chapter we will see how the employer might use them to make optimal choices in his benefit decision- making process. In addition, we will introduce briefly the actuarial principles that determine how benefit plans should be funded and how certain plan designs affect the rate at which benefits are distributed. total rewards two entrepreneurs are starting a new airline to provide service to three cities situated about 400 miles from each other. Their strategy is to fill a void that currently exists for business travelers who are looking for a low-cost, no-frills, and dependable commuter airline. One of the first issues the owners confront is how to compensate their workforce, especially the pilots. They cannot afford to match the high salaries and rich benefit levels of the large airlines, they have no stock or equity benefits to offer at this point, they will not be profitable for several years, and a cash-based profit sharing plan is not feasible. How will they attract pilots? The answer is that they must look at total rewards, not just salaries and benefits long-term retention is not a priority. If they can find competent pilots who need flight hours and are excited about working for a new airline, the company will succeed. By offering flight hours in the cockpit, the company provides new pilots with a valuable opportunity and the possibility of moving on to a bigger airline in the near future. So, while the new airline is limited in what it can pay in terms of salaries, it can offer a bonus based on company results, the promise of future equity when the company goes public, moderate retirement and health care benefits, and plenty of flight hours. The benefit package might include a defined contribution plan funded by tax-deferred employee contributions as well as a high deductible health care plan that imposes significant cost sharing on the employee but extends protection in the case of serious and costly medical occurrences. the salary and benefits would be well below that of the major airlines, but would allow the company to compete effectively in its markets. Its total compensation would be both affordable for the company and attractive to its particular workforce.
  • 7. CONCLUSION Taking into consideration all the above discussions as well as the examples, we may conclude that the impact of Economics on Human Resource either in direct or indirect aspect is undeniable. Human Resource is the most Important and vital factor of Economic Development or it can be said that humans are the agents of development. Human Resource development has positive effects on the backwardness economy and society. The provision of education will increase literacy which will produce skilled Human Resource. Similarly provision of health facilities will result in healthy Human Resource which will contribute to the national economic development. Beside this education, clean environment, investment on the human resource, will all have its positive effects. Job opportunities would be created in the country. And even business environment will flourish in the state which creates many job opportunities. ****************************************