Human Resource Management & Accounting: An Employee's Perspective (Research Paper)

Human Resource Management & Accounting: An
Employee’s Perspective
A Project Submitted to University of Mumbai
for partial completion of the
Degree of Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce
By
Javeria Ansari
Roll No. 35
Under the Guidance of
Suraj Agarwal
B. K. Birla College of Arts, Science and Commerce (Autonomous), Kalyan
April 2019-2020

B. K. Birla College of Arts, Science and Commerce (Autonomous), Kalyan
B.K. Birla College Road, Kalyan (West)
Certificate
This is to certify that Ms. Javeria Ansari has worked and duly
completed her project for the degree of Bachelor in Commerce (Accounting &
Finance) under the Faculty of Commerce and her project is entitled, “ Human
Resource Management & Accounting: An Employee’s Perspective ” under
my Supervision.
Name and Signature of Guiding Teacher
Date of submission: 25th
December, 2020
Seal of the
College

Declaration by Student
I, the undersigned Miss Javeria Ansari hereby, declare that the
work embodied in this project work titled “ Human Resource
Management & Accounting: An Employee’s Perspective ”, forms my own
contribution to the research work carried out under the guidance of Suraj
Agarwal is a result of my own research work and has not been previously
submitted to any other University for any other Degree/Diploma to this or any other
University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.
Name and Signature of the learner
Certified by
Name and signature of the Guiding Teacher

Acknowledgment
To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving
me chance to do this project.
I would like to thank our Director (Education) and Principal for
providing the necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator, for his moral support
and guidance.
I would also like to express my sincere gratitude towards my project
guide Suraj Agarwal whose guidance and care made the project
successful.
I would like to thank my College Library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

Index-I
Chapter No Content Page No
1 Introduction 6
2 Research Methodology 28
3 Review Of Literature 29
4 Data Analysis, Interpretation and Presentation 40
5 Conclusion & Suggestions 53
❖ References
❖ Appendices
▪ Questions
▪ Abbreviations

Name: Javeria Ansari Class: TY BAF (B) Roll.no. 35
Human Resource Management & Accounting: An
Employee’s Perspective
Introduction To Human Resource Accounting
Human resource accounting (HRA) is the process of identifying and reporting investments
made in the human resources of an organization that are presently unaccounted for in the
conventional accounting practice. It is an extension of standard accounting principles.
Measuring the value of the human resources can assist organizations in accurately documenting
their assets. In other words, human resource accounting is a process of measuring the cost
incurred by the organisation to recruit, select, train, and develop human assets.
Human resources are considered as important assets and are different from the physical assets.
Physical assets do not have feelings and emotions, whereas human assets are subjected to
various types of feelings and emotions. In the same way, unlike physical assets human assets
never gets depreciated.
Therefore, the valuations of human resources along with other assets are also required in order
to find out the total cost of an organization. In 1960s, Rensis Likert along with other social
researchers made an attempt to define the concept of human resource accounting (HRA).
Definitions
1. The American Association of Accountants (AAA) defines HRA as follows: ‘HRA is a
process of identifying and measuring data about human resources and communicating
this information to interested parties’.
2. Flamhoitz defines HRA as ‘accounting for people as an organizational resource. It
involves mea-suring the costs incurred by organizations to recruit, select, hire, train,
and develop human assets. It also involves measuring the economic value of people to
the organization’.
3. According to Stephen Knauf, ‘ HRA is the measurement and quantification of human
organizational inputs such as recruiting, training, experience and commitment’.
Need For Human Resource Accounting
The need for human asset valuation arose as a result of growing concern for human relations
manage-ment in the industry.

Behavioural Scientists Concerned With Management Of Organizations Pointed
Out The Following Reasons For HRA
1. Under conventional accounting, no information is made available about the human
resources employed in an organization, and without people the financial and physical
resources cannot be operationally effective.
2. The expenses related to the human organization are charged to current revenue instead
of being treated as investments, to be amortized over a period of time, with the result
that magnitude of net income is significantly distorted. This makes the assessment of
firm and inter-firm comparison difficult.
3. The productivity and profitability of a firm largely depends on the contribution of
human assets. Two firms having identical physical assets and operating in the same
market may have different returns due to differences in human assets. If the value of
human assets is ignored, the total valuation of the firm becomes difficult.
4. If the value of human resources is not duly reported in profit and loss account and
balance sheet, the important act of management on human assets cannot be perceived.
5. Expenses on recruitment, training, etc. are treated as expenses and written off against
revenue under conventional accounting. All expenses on human resources are to be
treated as investments, since the benefits are accrued over a period of time.
Objectives Of Human Resource Accounting
The human resource process was established to fulfil a number of objectives within the
organization. These include:
1. To furnish cost value information for making proper and effective management
decisions about acquiring, allocating, developing, and maintaining human resources in
order to achieve cost effective organizational objectives.
2. To monitor effectively the use of human resources by the management.
3. To have an analysis of the Human Asset, i.e. whether such assets are conserved,
depleted, or appreciated.
4. To aid in the development of management principles and proper decision making for
the future, by classifying the financial consequences of various practices.

Methods Of Human Resource Accounting
Approaches to human resource accounting were first developed in 1691. The next approach
was developed from 1691 to 1960, and the third phase was post-1960.
There are two approaches to HRA. Under the cost approach, also called the "human resource
cost accounting method" or model, there is an acquisition cost model and a replacement cost
model. Under the value approach, there is a present value of future earnings method, a
discounted future wage model, and a competitive bidding model.
Considering the pros and cons of various models, Chennai -based CA Lakshmi Narayanan
Ramanujan has worked out a simple to use and easy to adopt, unique model titled Give GET,
for the Human Resource Valuation and Accounting, while accounting for PEACE.
Cost Approach
This approach is also called an acquisition cost model. This method measures the organization's
investment in employees using the five parameters: recruiting, acquisition, formal training and
familiarization, informal training and informal familiarization, and experience and
development. This model suggests that instead of charging the costs to profit and loss statement
(P&L) accounting, it should be capitalized in the balance sheet. The process of giving a status
of asset to the expenditure item is called capitalization.
In human resource management, it is necessary to amortize the capitalized amount over a
period of time. So, here one will take the age of the employee at the time of recruitment and at
the time of retirement. Out of these, a few employees may leave the organization before
attaining the superannuation. This method is the only method of Human Resource Accounting
that is based on sound accounting principles and policies.
Limitations:
• The valuation method is based on the false assumption that the dollar is stable.
• Since the assets cannot be sold there are no independent checks of valuation.
• This method measures only the costs to the organization, but ignores completely any
measure of the value of the employee to the organization.
• It is too tedious to gather the related information regarding human values.
• it may be possible that the employee is already fully trained and there is no need to
incur any development, training, or recruitment costs. It will create difficulty for a
company to find out CTC according to acquisition model.
• Does not account for software which can reduce the overall cost of human resources by
having integrated software completing the tasks of staff.

Replacement Cost Approach
This approach measures the cost of replacing an employee. According to Likert (1985)
replacement cost includes recruitment, selection, compensation, and training cost (including
the income foregone during the training period). The data derived from this method could be
useful in deciding whether to dismiss or replace the staff.
Limitations:
• Substitution of replacement cost method for historical cost method does little more than
update the valuation, at the expense of importing considerably more subjectivity into
the measure. This method may also lead to an upwardly biased estimate because an
inefficient firm may incur a greater cost to replace an employee (Cascio 3-4).
Present Value Of Future Earnings
Lev and Schwartz (1971) proposed an economic valuation of employees based on the present
value of future earnings, adjusted for the probability of employees’
death/separation/retirement. This method helps in determining what an employee's future
contribution is worth today.
Limitations:
• The measure is an objective one because it uses widely based statistics such as census
income return and mortality tables.
• The measure assigns more weight to averages than to the value of any specific group
or individual (Cascio 4-5).
• Value to the organization
• Hekimian and Jones (1967) proposed that when an organization had several divisions
seeking the same employee, the employee should be allocated to the highest bidder and
the bid price incorporated into that division's investment base. For example, a value of
a professional athlete's service is often determined by how much money a particular
team, acting in an open competitive market, is willing to pay him or her.
Limitations:
• The soundness of the valuation depends wholly on the information, judgment, and
impartiality of the bidder (Cascio 5).
Expense Model

According to Mirvis and Mac (1976), this model focuses on attaching dollar estimates to the
behavioral outcomes produced by working in an organization. Criteria such as absenteeism,
turnover, and job performance are measured using traditional organizational tools, and then
costs are estimated for each criterion. For example, in costing labor turnover, dollar figures are
attached to separation costs, replacement costs, and training costs.
Model On Human Resource Accounting
This model prescribes the human resource accounting approach for two categories of
employees:
• Employees, who are at strategic, key decision-making positions such as MD, CEO
• Employees, who execute the decision taken by Top Executives (Vice President,
Directors)
• Model arrives value of human resources as the sum of below-mentioned three parts:
1. Real capital cost part
2. Present value of future salary/wages payments
3. Performance evaluation part
Limitations:
• Calculation process is lengthy and cumbersome.
• Lev and Schwartz valuation principles have been used at one point of time, so this
model contains a weakness from the Lev and Schwartz model.
Other limitations:
• Ravindra Tiwari has prescribed another approach to value human resources at the time
of annual appraisal exercise, which suggests valuation of human resources on different
appraisal parameters.
Benefits Of Human Resource Accounting
1. The system of HRA discloses the value of human resources, which helps in proper
interpretation of return on capital employed.
2. Managerial decision-making can be improved with the help of HRA.
3. The implementation of human resource accounting clearly identifies human resources
as valu-able assets, which helps in preventing misuse of human resources by the
superiors as well as the management.
4. It helps in efficient utilization of human resources and understanding the evil effects of
labour unrest on the quality of human resources.
5. This system can increase productivity because the human talent, devotion, and skills
are consid-ered valuable assets, which can boost the morale of the employees.

6. It can assist the management for implementing best methods of wages and salary
administration.
Limitations Of Human Resource Accounting
Human resource accounting is the accounting methods, systems, and techniques, which
coupled with special knowledge and ability, assist personnel management in the valuation of
personnel in their knowledge, ability and motivation in the same organization as well as from
organization to organization. It means that some employees become a liability instead of
becoming a human resource. HRA facilitates decision making about the personnel, i.e. either
to keep or to dispense with their services or to provide mega-training[clarification needed].
There are many limitations that make the management reluctant to introduce HRA. Some of
the attributes are:
1. There are no clear cut and specific procedures or guidelines for finding costs and value
of human resources of an organization. The systems that are being adopted all have
certain drawbacks.
2. The period of existence of human resources is uncertain and hence valuing them under
uncertainty in the future seems to be unrealistic.
3. The much needed empirical evidence is yet to be found to support the hypothesis that
HRA as a tool of management facilitates better and effective management of human
resources.
4. Since human resources are incapable of being owned, retained, and utilized, unlike
physical assets, this poses a problem to treat them as assets in the strict sense.
5. There is a constant fear of opposition from trade unions as placing a value on employees
would make them claim rewards and compensations based on such valuations.
6. In spite of all its significance and necessity, tax laws don't recognize human beings as
assets.
7. There is no universally accepted method of the valuation of human resources.
Human Resource Accounting: A Historical Perspective
Recent years have witnessed the emergence of numerous treatises on the relative merits of
human resource accounting. While the unprecedented pervasiveness of human resource
literature suggests that the topic is new to our era, the debate itself is by no means novel. Indeed,
the concept of human resource accounting is deeply rooted in the history of economic thought.
To provide a desirable perspective of the current debate and thus a basis for an accurate
assessment of the probable impact of human resource accounting, a familiarity with the
development of the concept is necessary. The intent of this article is to trace the historical
evolution of human resource accounting to its present stage of development. Its purpose is to
impart the perspective essential to a thorough understanding of the pros and cons of human
resource accounting systems.

Human Capital In Early Economic Thought
Throughout history economists have been concerned with the concept of human capital, but
their treatment was limited to including human beings and their skills in a definition of capital.
Several motives for treating human beings as capital and valuing them in monetary terms were
expounded. Of these a central motive is apparent—to serve as a basis for making a decision or
to influence the decisions of others.
Meanwhile, a small group of relatively unknown economists undertook to develop techniques
to measure the worth of human capital. Basically, two methods of estimating the value of
human beings emerged-
(i) the cost-of-production
(ii) (ii) the capitalized earnings procedures.
In the cost-of-production approach costs incurred in “producing” a human asset are estimated.
The capitalized earnings procedure consists of estimating the present value of an individual’s
future in-come stream. As described below, these two early approaches parallel closely the two
basic approaches to human resource ac-counting currently advocated in the current literature.
Early Valuation Methods
Specific methods of human asset valuation, while consistent with one of the two general
approaches, varied widely from one advocate to another. One of the first attempts to estimate
the money value of human beings was made around 1691 by Sir William Petty [10]. Petty
considered labor the “father of wealth” and thus felt that labor must be included in any estimate
of national wealth. Accordingly, this first attempt at human asset valuation estimated the value
of the stock of human capital by capitalizing the wage bill in perpetuity at the market interest
rate; the wage bill being determined by deducting property income from national income.
The first truly scientific procedure for finding the money value of human beings was devised
in 1853 by Farr. He advocated the substitution of a property tax for the existing English income
tax system. The former would include property consisting of the capi-talized value of earning
capacity. His procedure for estimating capitalized earning capacity was to calculate the present
value of an individual’s net future earnings.
Ernst Engel’s writings around 1883 recommended a cost-of-pro-duction procedure for
estimating the monetary value of human beings. He reasoned that expenditures for rearing

children were costs to their parents and that this cost might be estimated and taken as a measure
of their monetary value.
In 1867, a “composite” version reflecting Farr’s capitalized earnings and anticipating Engel’s
cost-of-production approach surfaced when Wittstein argued that an individual’s lifetime
earnings are equal to his lifetime maintenance cost plus education.
Alfred Marshall was perhaps the most forceful proponent of the concept of human assets. His
theoretical approach took on a capitalized-net-earnings flavor. However, departing from his
conceptual arguments, Marshall held that it would be out of touch with the marketplace to treat
humans as capital in practical analysis,
Human Resources As Consumption Expenditures
Marshall’s view of human capital as being “unrealistic” was per-haps a major contribution to
the virtual exclusion of the concept of human resources from the main stream of economic
thought from the beginning of the twentieth century to the recent renewal of interest. Marshall’s
view, if not a causal factor, is certainly descriptive of the general view that it was neither
appropriate nor practical to apply the concept of capital to human beings.
Besides this accepted assessment, various other reasons prob-ably help explain the exclusion
of humans from the concept of economic capital. Generally, the mere thought of investments
in humans was offensive to most people. Additionally, it has been all too convenient in
marginal productivity analysis for economists to treat labor as if it were a unique bundle of
innate abilities that are wholly free of capital.
These reasons were probably sufficient to exclude human capital from the core of economic
thought for several decades. Expenditures for humans were viewed as “consumption,” in
economic jargon, rather than as “investments.” This treatment by economists had a significant
impact upon the treatment accorded human resource expenditures by accountants.
Several of the underlying concepts of modern accounting theory are derived from classical
economic theory and many of these matured during the period in which human capital was
excluded from practical consideration by economists. Because of the close conceptual
relationship between early accounting and economics, accounting theorists ignored human
assets as the concept was simultaneously ignored in economic analysis.2 When economists
began to treat investments in human resources as “consumption” rather than “investments,”
accountants established that these expenditures were “expense” rather than “assets.”

Renewed Interest In Labor Intensive-Specialized Economy
The advent of massive governmentally supported social programs in the decade of the 1960’s
rekindled the interest of economists in human assets. Particularly, economists sought to
influence the direction of the massive investment in these social programs. They sought to
evaluate these programs in -terms of return on investment. This desire led to the necessity of
thinking of such expenditures as capital rather than consumption expenditures.
Increasingly massive investments by industry in human assets have been cited as compounding
the impact of the error of excluding human assets from capital. The large increases in real
earnings of workers, essentially unexplained by classical analysis, can reasonably be attributed
to return on investment in humans,
Moreover, Mincer has demonstrated the causal relationship between amount of training and
inter-occupational differentials in personal income.
The contribution of labor toward the growth rate of real national income is increasing as a
percentage while the percentage contributed by physical capital is decreasing. Labor’s
increasing marginal product can be attributed in part to expenditures for training. Re-search by
Thurow directed attention toward the existence of human capital resulting from investments in
training programs.
The Beginning Of Human Resource Accounting
The revival of interest by economists in the topic of human capital was accompanied by, or
perhaps caused, an examination of the concept of human resource accounting by accounting
theorists. Until then, accountants had considered the problem of valuing human resources to be
part of the larger problem of valuing goodwill.
The recent research in this area attempts to distinguish economic values attributable to the
human resources of a firm from the values attributable to other components of goodwill. These
projects and limited implementation of research results is subsumed under the title of human
resource accounting.
Research in human resource accounting reflects the two routes evidenced in contemporary
accounting theory. One segment of the research is directed toward the investigation of concepts
for the measurement of human resource costs: original cost, replacement cost, and opportunity
cost. Another segment investigates the determinants of the value of human resources of
employees as a group or of individual employees. This branching of current research in human

resource accounting closely parallels the “cost-of-production” and “capitalized earnings”
measurement approaches taken by early economists many decades ago.
Attempts to measure human resource cost have resulted in the development of three different
concepts and measurement models. The first of these measurement concepts, original cost, is
illustrated in the works of Brummet, Flamholtz, and Pyle who individually and collectively
have developed concepts, models, and techniques for measuring the historical cost of human
resources. Concern has been expressed over the historical cost concept—namely, that the real
economic value of the investment may be significantly different than its cost.
The model of Brummet, et. al. is a generalized model which can be extended to incorporate
replacement costs. Other researchers have developed models for the measurement of human
resource replacement cost. The end result of the operation of such models is a measure o f the
cost to replace individuals occupying organizational position.
Perceived deficiencies in the replacement cost approach to measurements led others to develop
the concept of opportunity cost to value human resources. Hekimian and Jones, for example,
have suggested a system of competitive bidding to obtain managerial assessments of
opportunity cost of human assets. Like the other measurement concepts, opportunity cost
measurement has its critics as well.
Essentially, the suggestions to value human assets at historical or original cost are accounting
adaptations of the “cost of production” techniques developed by Engels in 1883 and suggested
by Shultz in 1960. Proposals to obtain replacement or opportunity cost measures parallel the
current conceptual debate in accounting theory to find an acceptable alternate to historical cost.
While one segment of accounting research in human resource accounting has been directed
toward measurement concepts, an-other is directed toward the investigation of the determinants
of the value of human assets. The development of this theory is proceeding from two different
approaches.
Growing out of the studies on organization and leadership at the University of Michigan’s
Institute for Social Research, Likert and others have attempted to develop a model of
determinants of a group’s value to an organization. Hermanson proposed two possible
techniques for the monetary valuation of the total human assets of a firm. Additionally,
Brummet, Flamholtz, and Pyle as well as Lev and Schwartz have suggested methods to arrive
at the value of employees as a group. In a different approach, Flamholtz has attempted to
develop a model of the determinants of an individual’s value to a firm.

With the exception of Likert’s model, the methods proposed for determining the value of
employees or groups of employees to an organization are similar in principle to the proposal
of the economist William Farr. At the core of the proposals is the realization that the value of
people to an organization is the present worth of the future services they are expected to
render—the “capitalized earnings” approach.
Likert’s model per se is not intended to measure the value of human resources, but the
efficiency of various types of management systems. Likert, Flamholtz, Pyle, and Brummet
have suggested that measurement of the present state of the causal and intervening variables
would provide a basis to forecast future end-result variables. The forecasted end-result
variables would serve as a basis to forecast future contributions by employees. This would
serve as a basis to value human resources.
Hermanson’s suggested methods attempt to provide protection against manipulation by
management. The proposals utilize capitalized current excess earnings or modified future
employee earnings as a measure of human capital. In both proposals the impact of the economic
concept of value is apparent.
The proposal of Lev and Schwartz to capitalize future compensation is an adaptation directly
comparable to that of William Farr. Flamholtz’s suggestion for the valuation of an individual
utilizes a series of capitalizations corresponding to the service states the individual is expected
to occupy.
Present Scenario
Nowadays many organizations like to emphasize on gaining a competitive advantage in the
market. The advance equipments, new technology, good marketing strategic, excellent
customer services and many other elements can be the factors to build up for the advantages.
However, human resource is still the most important element to determining the success or
failure of an organization. Without their support, the organization daily business function will
not be done well and ready. Human resource is always related to one organization profitability
and their ability cannot be replaced by machines.
The skills, knowledge and experience of each individual contribute to the growth of
organizations, communities and nations. Such valuable human talent can be thought of in terms
of human capital and is one of the primary requirements for national economic development.
Strategic human resource management is playing an important role as organization
development in today’s competitive market. Organizations recognize the importance of
focusing on the human factor to contribute ideas in order to improve the productivity. They

design the recruiting plan to approach talent peoples, training and develop them in order to
perform those competencies. The organization put in affords to meet the expectation of the
employees so that create a workplace atmosphere among the employees.
Ironically, while human resources are the most important asset in an organization, they are also
the cost involved during the training activity. The organization suffers the cost if they employed
the wrong candidate for the job. Such costs can be calculated in direct and hidden cost. Direct
cost can be considered as recruitment advertisement, conduct new training for new staffs,
medical check up and so on. Also, the company will found the hidden cost in such that way of
lower morale among old employees.
Views Of Traditional Accounting Researches
According to traditional accounting researchers, they should not support to human resource
accounting. Because of they think like that human resource accounting cause more difficulties
in accounting process. That’s why they should not support the human resource accounting.
Views Of Modern Accounting Researches
According to modern accounting researchers, they should support to human resource
accounting. Because of they think like that human resource accounting back bone of any
organization and also every asset created by them. So why should not show human resource as
an asset in accounting process.
“The problem in fact, starts when it comes to assessing the real value of human asset. Why
most organizations can readily give detailed information about their transactions assets such
as, plant and machinery and land and building, office equipment. There is no formal record of
investment in employees.”
Significance Of Human Resource Accounting
1. Programming policies and programs for the development of human resource.
2. Decision regarding cost reduction program.
3. Training and development.
4. Recruitment and selection.
5. Man power planning and control.
6. Conservations and reward of human resource.
7. Making a choice of between various types of human investments and investment in
other assets.

Classification Of Human Resource Cost
The human resource costs are 3 types.
A) Recruitment Cost
The cost incurred up to the stage of reporting for duty of employees normally called Acquisition
cost. It includes like advertising, application processing, screening, conduct test, interviews,
and remunerations.
B) Training and Development Cost
The cost incurred from the time of reporting for duty to stage of placing the person. So recruited
on the jobs are normally know as development cost. This cost comprised salary of the trainers,
the cost of study materials, consultancy fee, and a share of administration expenditure.
C) Operational Wages and Salaries
Periodic payments to the employees after they are recruited and assigned with specific work
may be called operational wages and salaries. This cost includes employee’s contribution
towards the employees, insurance and provided fund.
Approaches To Human Resource Accounting
Human resource accounting basically had two methods i.e.
1. Human Resource Cost Accounting
Human resource cost accounting also includes some methods such as, Historical cost method,
Replacement cost and competitive bidding method.
2. Human Resource Value Accounting
Human resource value accounting also includes, some methods such as, jaggy and law method,
Net benefit method, Economic value method, Present value of future earnings, and Adjusted
discounted future wages method.
Human Resource Accounting
Human resource accounting involves the tracking of all costs related to employees in a separate
report. These costs include employee compensation, payroll taxes, benefits, training, and
recruiting. Such an accounting system can be used to determine where human resources costs
are especially heavy or light in an organization. This information can be used to redirect
employees toward those activities to which they can bring the most value. Conversely, the

report can be used to identify those areas in which employee costs are too high, which may
lead to a reduction in force or a reallocation of staff away from those areas.
A more comprehensive human resource accounting system goes beyond the simple tracking of
employee-related costs, and addresses the following two additional areas:
Budgeting. An organization's annual budget includes a human resources component, in which
is concentrated all employee costs being incurred from across the organization. By
concentrating cost information by its nature, management can more clearly see the total impact
of human resource costs on the entity.
Employee valuation. Rather than looking at employees as costs, the system is redirected toward
viewing them as assets. This can involve the assignment of values to employees based on their
experience, education, innovativeness, leadership, and so forth. This can be a difficult area in
which to achieve a verifiable level of quantification, and so may have limited value from a
management perspective.
From an accounting perspective, the expense-based view of human resources is quite easy -
employee costs from the various departments are simply aggregated into a report. The
employee valuation approach is not a tenable concept for the accountant, since this is an
internally-generated intangible asset, and so cannot be recorded in the accounting system.
Are Employees an Expense or an Asset? (Resource Management)
“Being an employee of several different companies, I can honestly say that I’ve felt like nothing
more than a line item on a spreadsheet somewhere that an accountant is desperately trying to
eliminate.”
This comment was written by a reader on a recent article, Putting Employees Ahead of
Customers, and it got me thinking. Why do so many managers treat their employees like a cost
that needs to be eliminated?
My conclusion was that the problem may be related to accounting. Why? Because in
accounting, employees are an expense.
Consider this. By accounting rules, the cost of workers is treated as an expense on the income
statement. In fact, personnel expense is one of the highest costs a company incurs. Many
managers see this sizable cost every month and conclude that people are expensive. They see

people as a problem. By seeing people as a costly expense, these managers think that a quick
way to more profits is by reducing people or salaries. They look at employees as an expense or
a problem that must be reduced or eliminated.
“Assets are company resources which have future economic value.”
Great leaders see things differently. They consider employees as an asset. In accounting terms,
assets are company resources which have future economic value. Instead of seeing employees
as a problem, these leaders see them as a valuable resource. They know that people have the
capability to grow sales, satisfy customers, improve processes, innovate products, and do
countless other things that add money to both the top and bottom line. As a CEO, I see daily
examples of this in my business, Peak Demand.
If you think of employees as an asset, as I do, you treat them differently. You understand the
importance of keeping them happy and operating at peak performance. You recognize the
importance of leadership. You realize your team will be at their best when they are loved,
appreciated, respected, engaged, and acknowledged.
It seems simple to me but it’s not often practiced. I think one of the problems is the lack of
leadership training in business schools. Most graduate and undergraduate students take
multiple courses in accounting but they may only attend one or two lectures on leadership. The
result is we are sending young managers to the workplace with a belief that numbers are more
important than people.
“Great leaders know better”
In accounting, employees are an expense but great leaders know better. They know people are
an asset that represent the future results of a company. They see their team as an important
resource that needs to be led properly to maximize performance. They understand their team
will be at their best when they are loved, appreciated, respected, engaged, and acknowledged.
Where do you stand? Do you see employees as an expense or an asset? Have you worked for
a manager who treated you like an expense or a problem that needed to be reduced? How did
that feel? Have you worked for a leader that treated you like an important asset? What was that
like? These questions keep popping in my head.

Performance Appraisal
Performance appraisal or performance review is a systematic process in which employee
performance at work is evaluated in relation to the projects on which employee has worked and
his contribution to the organisation. It is also known as an annual review or performance
review.
It helps the managers place the right employees for the right jobs, depending on their skills.
Often, employees are often curious to know about their performance details and compare it
with their fellow colleagues and how they can improve upon it. So every company needs a
good performance appraisal system.
The basic purpose of performance appraisal is to identify employees worth and contribution to
the company. Important factors include – attendance, efficiency, attitude, quality of work,
amount of work are just a few important factors.
The physical or objective factors like attendance, amount of work, efficiency can be easily
measured by the records maintained by the Human Resource Department Manager.
However, it gets a bit icky, when it comes to measuring subjective factors like attitude,
behaviour, friendliness etc. But to properly evaluate an individual’s performance, appraisal of
both subjective and objective factors needs to be done.
As Dale Yoder said, “Performance appraisal includes all formal procedures used to evaluate
personalities and contributions and potential of group members in a working organisation. It is
a continuous process to secure information necessary for making correct and objective
decisions on employees.
Performance Appraisal Methods
There are various methods that are used by managers and employers to evaluate the
performance of the employees, but they can be put into two categories:
• Traditional Methods
• Modern Methods

Performance Appraisal Process
1. Setting performance standards
2. Set up measurable goals
3. Measure actual performance
4. Compare with pre-set standards and goals
5. Discuss with the employee – met the expectations, did not meet the expectations,
exceeded the expectations
6. Take corrective actions
7. Set standards for next cycle
Advantages of Performance Appraisal
1. A systematic appraisal system helps the managers to properly identify the performance
of employees in a systematic manner and their areas of talent and areas where they are
lacking.
2. It helps the management to place the right employees for the perfect jobs depending on
their skills in particular areas.
3. It helps employees identify the areas in which they need to improve. The managers can
also use this information to provide constructive criticism of the way employees
perform their work.
4. Potential employees are often given promotions on the basis of or the results of
performance appraisals. People who have high ratings get promotions. They can also
transfer or demote employees if they not performing up to the expectations of the
managers.
5. An appraisal is also useful in determining the effectiveness and results of training
programmes. It can show managers how much employees have improved after taking

the training programmes. This will give managers data on how to change and evolve
the training programmes.
6. It creates healthy competition among employees as they will try to improve their
performance and score better than their colleagues.
7. Managers use appraisal programmes to identify the grievances of employees and act
upon them.
8. Keeping extensive records of performance appraisal will give managers a very good
idea of which employees have the highest growth rate and are which ones have a
declining rate of performance.
Disadvantages of Performance Appraisal
1. If the factors being used in the performance appraisal are incorrect or not relevant, the
appraisal will fail to provide any useful or effective data.
2. Sometimes, equal weightage is not given to important factors when performing an
appraisal.
3. Some objective factors are very vague and difficult to gauge like attitude and initiative.
There is no scientific method to measure these factors.
4. Managers are sometimes not qualified enough to correctly assess the employees and
their abilities. Thus, these mistakes can be very detrimental to the growth of the
company.
The Purpose Of An Employee Payroll File
The employee payroll file is the repository for everything that has to do with an employee's
paycheck. The main reason to create a payroll file is to limit access to the rest of the confidential
information that is located in the personnel file.
The payroll file enables accounting staff to pay the employee without accessing employee
confidential information. Accounting staff can keep payroll records where it makes sense for
paying the employee. In instances where payroll and accounting are outsourced, this is an even
more recommended practice for the employee's payroll records.
The payroll file limits accessibility to confidential employee information. The employee
payroll file enables accounting and finance staff to have the information they need to pay the
employee in a handy location. The location should be secure and out-of-reach to any other
employees.
You need to impress on accounting staff the fact that the information in the payroll files is
confidential and should not be shared without the permission and sign off from HR staff. Nor

should accounting staff share any information about employee raises, promotions, bonuses,
and any other information that is confidential about employees.
Human Resources does not need to monitor accounting's access to the employee payroll files.
As is recommended for related employee files such as the personnel and medical files, you
should limit access to the payroll file. Only people who need to have the information to do their
job should see the contents.
Contents of an Employee Payroll File
• This is a suggested list of what belongs in an employee payroll file.
• Offer letter signed by the hiring manager, Human Resources, and employee
• Pay authorization signed by Human Resources and the hiring manager when an
employee contract exists
• W-4 form
• Paperwork and authorization relating to any employee benefit that involves a payroll
deduction
• Direct deposit authorization form
• Salaried time accounting forms
• Hourly weekly time sheets
• Time clock records, where used
• Attendance records
• Expense reimbursement requests including documentation and receipts for travel and
other authorized expenditures
• Tuition reimbursement forms and receipts for payment, books, and so forth
• Pay in advance request forms
• Company loan documents and payment schedule
• Garnishment orders and records
• Authorization for release of private information
• Paperwork relating to each employee raise
• Paperwork related to any bonus, profit sharing, or recognition award
• W-2 forms
• Authorization for any other payroll actions that your company permits
Employee’s Performance
How your employees perform daily in your business will have an impact on your business's
success or failure. Employee performance involves factors such as quality, quantity and
effectiveness of work as well as the behaviors your employees show in the workplace. You –
the business owner – have control over setting these expectations and monitoring them
regularly. Understanding performance metrics, employee performance review methods and

ways to improve performance will help you ensure your workforce can meet your business's
needs and your customers' needs.
Employee performance refers to how your workers behave in the workplace and how well they
perform the job duties you've obligated to them. Your company typically sets performance
targets for individual employees and the company as a whole in hopes that your business offers
good value to customers, minimizes waste and operates efficiently.
For an individual employee, performance may refer to work effectiveness, quality and
efficiency at the task level. Your salesperson, for example, may be expected to complete a
certain quota of calls to potential leads per hour with a specific portion of those resulting in
closed sales. On the other hand, a production worker may have performance requirements for
product quality and hourly output.
Individual performance affects your team and organizational performance. If you have
employees who can't keep up or who perform subpar work, this means that other workers may
have to pick up the slack or that you have to have work redone. When employee performance
is poor, you may not be able to satisfy your customers and thus see negative impacts on your
profits, company reputation and sales.
Common Employee Performance Metrics
The specific metrics used to monitor employee performance will ultimately depend on the type
of work your business does. However, there are some universal metrics to consider.
Businesses should monitor the quality of work, individual employee goals, effectiveness of
training and employee efficiency. Evaluating quality of work and efficiency helps you prevent
expensive mistakes, makes it more likely that your employees meet deadlines and reduces
wasted time, materials and effort. Evaluating the effectiveness of training and individual
employee work goals will help you determine if employees are best equipped to perform their
jobs and to offer guidance when needed.
Some more specific performance metrics you might use depending on your type of business
include:
• Number of product defects
• Number of errors
• Number of sales
• Number of units made
• Call handling time

• First-call resolution
• Absenteeism rate
Evaluating Employee Performance
Your business has several employee performance evaluation methods from which to choose,
and you may find it helpful to use multiple methods to get a more complete picture of
individual, team and organizational performance. Some of these include:
• Management by objectives: This employee performance-review method focuses
on goal setting between managers and employees. It has the advantage of giving
employees clear expectations of how they should perform their jobs and uses deadlines
to monitor progress toward these goals.
• 360-degree feedback: This method takes advantage of getting input on employee
performance from several individuals with whom the person works. In addition to
having a direct supervisor look at work-performance metrics like effectiveness and
efficiency, co-workers, other managers and anybody else to whom the worker reports
can provide perspective on the employee's skills and character.
• Scale and ranking methods: There are various employee performance-review
options that use lists or scales of desired traits to assess an employee. Employees may
be ranked based on best to worst performance to easily identify those who may be
desirable for higher roles as well as those who need more training.
• Employee self-evaluation: Often used in conjunction with another review method,
self-evaluation gives employees a chance to think about their own work performance
and identify their strengths and weaknesses. The disadvantage of this method, though,
is that it can be hard for employees to be subjective about themselves.
Improving Employee Performance
In addition to evaluating employee performance regularly, you'll need an employee
performance-improvement plan to respond to your findings. It helps to first identify why your
employees do not meet performance expectations. Perhaps they lack proper training,
motivation, morale or understanding of performance targets.

Once you've identified the cause, it's time to take action in the forms of offering additional
training, implementing an effective reward system, improving the work environment,
empowering your workers and using useful technologies.

Research Methodology
The purpose of this study is to gain insight on employee’s perspective on human resource
management as well as accounting. For example, what are the issues faced by the employees
and the feedbacks from them like their suggestions towards HRM & HRA for further
improvement.
Research Approach
The respondents will be the employees who are interested to cooperate. To collect the data,
survey will be done via Google Forms with a list of questionnaires prepared.
Sampling Method
The survey procedure for this study will be limited to employees of one city only with some
certain limitations. Moreover, it has to be taken under consideration, whether the respondents
fall under category or not. The sample size will be 50 for this study.
Data Collection Method
The primary data will be collected from the employees working in any organization.
Moreover, this data will be collected directly from the respondents through questionnaire
provided to them via online survey (Google Forms).
Data Analysis Method
The data analysis of this research will be mostly represented in qualitative manner. It has
been mentioned earlier that, the data will be gathered by conducting a survey through
questionnaire method. As a result, the analysis will be qualitative. However, there will be a
few quantitative solutions.

Review Of Literature
• Dr. Ananda Das Gupta, Malathahalli, Bangalore & Kavitha. C, College of
Management Studies, Chickballpaur, India, International Journal in
Management and Science in their paper A Study On Human Resource
(HRA): A New Paradigm In The Field Of Accounting By Considering
Human Resource As An Asset Of The Organization focused on studying the
objectives of HRA, describing its significance, and evaluating its impact on an
organisation. They questioned whether there was any significance or not with regards
to the impact of human resource accounting on the overall performance of an
organization. HRA creates awareness about the value of human resources, helping in
disclosure in financial statements. It being useful in identifying the cost and value of
human resources and also being helpful in making managerial decisions for future
purposes.
They accepted that there was significant impact on organizational performance by
adopting HRA in an organization, helping it to make better decisions and make
utilization of human resources in a better manner; making it beneficial to the
organization as well as the employees of the organization. Through HRA, it becomes
easier to estimate the value of an individual employee. On the basis of their performance
efficiency, the employees will also get fair salaries, incentives, promotions, etc.
• Cam Caldwell,Business and Management Research, American University
in the Emirates (AUE) in his paper Human Resource Management From A
Justice-Based Perspective acknowledges that the Human Resource Management
(HRM) function plays a vital ethically-based role in honoring duties owed to
organization employees and other stakeholders. Incorporating the research of the
University of Michigan ethics expert, LaRue Hosmer, this paper identifies
nine qualities associated with organizational justice as they relate to seven important
HRM responsibilities. This paper then offers five guidelines for Human Resource
Professionals to consider in honoring their justice-related obligations to those whom
they serve.
He concludes how organizations today struggle to earn the commitment, support, and
followership required to be successful, confirming that employees do not feel either
engaged or empowered and that trust in leaders in virtually every type of organization
is low. It is also noted that the actions of organizations in conducting HRM functions
have profound ethical implications. Organizations that struggle to earn the
followership and commitment of their employees lose the ability to compete
effectively in today’s extremely competitive global context. HRPs increase their
understanding of the importance of justice and its implications in their organizations –

and as they develop their knowledge and skills to demonstrate their trustworthiness –
they have the opportunity to make a major contribution to their organizations’ success.
• Jianwen Xiao, College of Business Administration, South China
University of Technology, Guangzhou, China in his paper A Preliminary
Study on the New Generation Employees’ Human Resource Management
And Enterprise Sustained Competitive Advantage—From The Perspective
Of Resource-Based View emphasizes how, due to the differences in their growing
background, some of their characteristics are increasingly recognized by managers.
Complaining, job-hopping, emphasizing ego and lack of sense of responsibility are
marked on this young group, which have created obstacles for managers to carry out
their works. Aiming at such a young group, the limitation of the traditional system
management has already appeared. In this paper, by analyzing on characteristics of new
generation employees, author proposes a new idea of human resource management for
the new generation employees, which is from the perspective of resource based view,
not only to help enterprises to obtain sustainable competitive advantage, but also to
provide a new direction for the management of new generation employees.
From the perspective of resource-based view, the new generation employees are
valuable, scarce, difficult to imitate, and irreplaceable, which can bring sustainable
competitive advantage to the enterprises. As a new generation of energy in today’s
society and enterprises, the new generation employees should not be underestimated.
Human resource management should be targeted to the new generation employees,
especially for their emotional appeals, which should attract the attention of business
managers and human resources workers, and pay attention to the growth of new
generation employees from the environmental, organizational and psychological levels,
concern the growth of the new generation employees demand, pay attention to
humanistic care, and provide a temperature environment and atmosphere for the growth
of new generation employees.
• Ganesh K. S., IOSR Journal of Business and Management, Dayananda
Sagar College of Engineering, Bangalore, India in his paper Study Of
Human Resource Accounting Practices explains how Human Resource is one of
the most important operations for any organization or business. Without the human
involvement can lose its efficiency in work, and all the areas of business and levels
human efficiency is required with machine efficiency. Thus, companies have to
recognize and appreciate the value of their employees. It is worth and capital
investments. He focuses on the main objectives in measuring the value of Human
Resources in the corporate financial statements by studying the Human Resources
Accounting practices, examining and identifying the challenges and issues, along with
the value of Human Resource at different levels of organization and determining the
human resource efficiency quotient.

Furthermore, he concludes the Problems With The Current Practice Of Accounting For
Human Resource. In this accounting principles treat all labor costs, including
benefits, wages, training, recruiting as expenses. This is similar to commodities such
as materials or supplies, and labor moved from the farm to the factory due to capital
concentration in and near major cities. While accepting the accounting theory the long-
term nature of capital assets and natural resource reserves, the current accounting
system masks labor’s long term contributions to the firm. The accounting
methodology has addressed current trends in the economy regarding non capital
assets, with a general change toward a market-to-market.
• Md. Shamimul Islam & Jaynob Sarker, Department of Business
Administration, Leading University, Sylhet, Bangladesh in their paper
Human Resource Accounting: Practical Challenges In Recognition,
Measurement, Accounting Treatment Procedure And A Possible Way Out
focused on reviewing the available models of HRA in order to unveil their strengths
and weaknesses, highlight the major characteristics of HRA along with the practical
challenges in implementation, understanding the needs and significance of HRA in the
context of business performance measurement, providing suggestions for developing
such accounting practices in our business enterprises, and proposing a solution in line
with the existing framework of accounting that could be adopted by the standard setters.
His findings state how the central problem in HRA is recognition of time and procedure
of recognizing human resources. Their Companies Act, 1994 does not provide for
valuation of human resources. As a result, to the business management, disclosure of
such information has become voluntary. The focus for policy should be to develop
preeminent model for valuing Human Capital; establish guidelines for reporting and
encourage compliance with said guidelines. The model yet proposed to quantify human
resources lacks the acceptability, this might suggest a willingness to recognize the need
for and consider the measurement and use of proposed solution where acquiring and
development cost are capitalized, then amortized over the service period and lastly
adjusted the human assets accounts because of any material change in an organization
which are related with human assets.
• Ananthalakshmi Mahadevan & Fadumo Ahmed Mohamed, International
Journal of Accounting & Business Management, FTMS College Malaysia
in their paper Impact Of Human Resource Management (HRM) Practices On
Employee Performance undertook the study with the basic objective of identifying
the impact of HR practices on employee performance at Telekom Malaysia. Three
major HR practices were chosen for study after review of literature and conducting a
study on HR practices at Telekom Malaysia. Three hypotheses were developed which

focussed on identifying the impact of Training, performance appraisal and Employee
participation on employee performance. The findings of the regression analysis proved
that there was a significant relationship between training on employee performance. It
was found that Performance appraisal has moderate influence on the performance and
employee participation in decision making has least influence on the performance.
The findings revealed that training, compensation and performance appraisal are highly
significant in employees’ efficiency and effectiveness. Likewise, it was revealed that
Training and compensation have significant influence on organization and employees’
performance. The study revealed that employee training helps to develop organization
performance, taking over a vital role in improving employee performance as well as
increasing productivity and eventually helping to place organizations in the best
position to face competitive challenges and stay on top.
• Philip H. Mirvis & Barry A. Macy, The Academy of Management Review,
Philip H. Mirvis Associates in their paper Human Resource Accounting: A
Measurement Perspective informs how before any wide-spread adoption of HRA,
it must be subject to a thorough examination. This paper joins a growing body
of literature which evaluates accounting data as a potential human measurement
tool. Beyond this evaluative perspective, the paper presents examples of a costing
approach which may circumvent some of the common measurement problems
advanced by such critiques.
It is found that the model was able to disaggregate most of the costs of behavioral
outcomes from each firm's accounting, production, and personnel records. The
major costs measured for the nonproduction behaviors were: lost productivity,
machine downtime, salaries and benefits paid, costs of maintaining an extra work
force, and other expenses associated with hiring and training new personnel. The
quantity and quality below standard costs are reported in standard direct labor
dollars, costs failing to reflect lost profit potential realizable through customer
sales.
• Eric Flamholtz, Maria Bullen, & Wei Hua, Management Decisions,
University of California, Los Angeles & San Jose State University in their
paper Human Resource Accounting: A Historical Perspective And Future
Implications illustrate how academic research can generate improvement in
management systems. The paper defines HRA and suggests implications of measuring
human capital for financial reporting and managerial uses. Recent Swedish-based HRA
applications with respect to measuring human assets and intellectual capital, including
the Skandia Navigator, illustrate how intellectual history and developments in business
schools can influence business history, providing an overview and history of human

resource accounting (HRA) with the objective of promoting both continued academic
research and organizational applications.
• Diana L. Deadrick & Dianna L. Stone, Human Resource Management
Review, Old Dominion University & University of New Mexico in their
paper Human Resource Management: Past, Present, And Future highlights
the changes in the employment relationship over time and how a brief historical
overview is not meant to be exhaustive; instead, it provides a context for appreciating
the strides they’ve made in what we now call “HRM.” In this special issue, they focus
on HRM past and present on issues such as the early beginnings, personnel,
labor/human relations, and other strategies of today. What is being called human
resource management (HRM) today has had a long and checkered history. A number
of key changes in the social and economic environment have affected the evolution of
HRM, some of which were highlighted. Although many of the historians of HRM begin
with the 19th century, which was a period of rapid industrialization in the U.S., their
review included much earlier development of tribes and, later, apprenticeship and
independent contractor systems of the late medieval period.
• Victoria Kenny & Nnamdi S. O., Baum Tenpers Research in their paper
Employee Productivity And Organizational Performance: A Theoretical
Perspective talk about conceptual framework with regards to employee’s training and
development and how they are interlinked and interdependent, rather than sequential
and hierarchical. Training and development being very crucial to the employees, the
organization and their effectiveness. Staff training and development can occur
simultaneously or complementary, but the two do not necessarily have direct relations
to each other. Therefore, training and development activities are important elements of
the human resource management function of an organization. How organizational
performance is the actual output/results of an organisation obtained when measured
against its intended outputs (goals and objectives). Proposing that organizational
performance encompasses three specific areas of organizations’ outcomes financial
performance (profits, return on assets, return on investment, etc.); product market
performance (sales, market share, etc.); and shareholder return performance (total
shareholder return, economic value added, etc.), which are the three primary
outcomes of corporate organisations being analyzed.
Furthermore, reviewing it theoretically with regards to theories on motivation of
transfer & expectancy theory. Motivation to transfer was hypothesized to connect
learning with individual performance change. To support the degree of transfer of
training desired, it is important to understand why individuals choose to apply their
knowledge, skills, and attitudes in their workplace. Several theories of human behavior
help us understand and predict behaviors that contribute to performance at work, as
well as clarify the motivation to transfer factor in Holton’s model including the theories

of expectancy, equity, and goal setting. At the beginning of the motivation cycle, effort
is a function of the value of the potential reward for the employee (its valence) and the
perceived effort-reward probability expectancy).
• Robert Klonoski, International Journal of Human Resource Studies, Mary
Baldwin University, Staunton, United States in his paper Defining Employee
Benefits: A Managerial Perspective focuses on “Benefits” offered to employees
as they promote job satisfaction and increase organizational commitment. They are
generally defined as forms of indirect or non-wage compensation, conceptualizations
that are principally useful for accounting and tax purposes. A definition of “benefits”
from a managerial perspective can help to clarify how they can be used to achieve
employee satisfaction and commitment. He includes a brief history of benefits, an
international comparison of their usage, and a review of their most widely accepted
definitions and thus, proposing a new definition of employee benefits.
He concludes how To date, the term has been generally been defined in terms that
are useful for accounting purposes with moderate variations in the specific terms
depending on whether the definition is being used by government, management, or
labor. For management, benefits have been long used to recruit and retain a talented
workforce, and therein lies their utility. As employee perceptions of the value of
benefits have been demonstrated to vary based on whether they are mandated by
regulation or are discretionary on the part of the employer, their usefulness as a
recruiting and retention tool is similarly dependent on this distinction. A conceptual
managerial definition of employee benefits should derive from the utility of the benefits
as recruiting and retention tools and relate to the form and direction of employee
motivation they take.
• Datuk Dr Mahamad Zubir bin Seeht Saad, International Journal of
Scientific and Research Publications, Pusrawi International College of
Medical Sciences in his paper Impact Of Employee Motivation On Work
Performance emphasizes that employees are main factors to manifest the business
goals into reality. Therefore, in today's world every organization tries to manage their
human resource department to keep their employees motivated. In that context some of
the management theories have been practicing by them. Business function or their
performance in the market can be evaluated by assess the level of motivation of
employees. Motivation can play a lead role to get the professional milestone in each
financial year in less effort manner. In that context he hypothesizes that the motivation
of employees plays the dominant role over the business performance of an organization
and that employee motivation is only a sub part for bringing the large number of
productivity.

As a conclusion it can be said that his paper highlighted over the shaded areas which
need to be take into consideration by various organizations in order to enhance the
business performance. In the phase of anti globalization era, a company can be effective
to fulfill the desire of the employees. Which can assist the human resource department
to understand about the various factors associated with the motivation factors of the
workers. Then after doing the entire study it can be concluded that in positive and
affirmative way it is a fact that the motivated employees can bring the desirable success
for the various business organization to reach over the targeted milestone in effortless
manner. The importance of this paper can be understood when it can be a useful
materials for the future researcher and for the academician as well. Moreover, various
business organizations can use this paper for strengthening their collaboration with
employees.
• Gabriela Rusu & Silvia Avasilcai, Conference: Proceedings of the 15th
Romanian Textiles and Leather Conference, Gheorghe Asachi Technical
University Iaşi, Judetul Iasi, Romania in their paper Human Resources
Motivation: An Integrative Model aimed to provide the conceptual model
of human resources motivation integrating the most important theories of
motivation, according to the literature. Also, showing the novelty of the current
research consists of an approach emphasizing also the role of contextual
dimensions influencing employees’ level of work motivation and the level of the
overall organizational performance. Joining together motivational factors from various
theories of motivation in the literature creates the premises for integrating all the
motivational sources relevant for increasing the level of employees’ motivation at the
workplace. Identifying the most important motivational factors, which influence
to a very large extent employees’ motivation, provides for managers relevant
insights of the issues which they should focus on in order to increase the
level of employees’ motivation, job commitment, engagement, involvement in
work activities and performance obtained at the workplace.
In conclusion, according to the current integrative model of human resources
motivation, they highlighted the role of organizational context variables (cultural
context and socio-technical context), according to the 3 C heuristic model of
motivation. Also, taking into account employees’ needs, values, motives,
goals, expectations, satisfaction, rewards and performance, according to the most
relevant theories of motivation, creates the premises for integrating the most important
motivational dimensions in order to investigate the level of employees’ motivation and
the influence on their work performance.
• Kenny S. & Victoria, Munich Personal RePEc Archive, United States in
their paper Employee Productivity and Organizational Performance: A
Theoretical Perspective talk about conceptual framework with regards to

employee’s training and development and how they are interlinked and interdependent,
rather than sequential and hierarchical. Training and development being very crucial to
the employees, the organization and their effectiveness. Staff training and development
can occur simultaneously or complementary, but the two do not necessarily have direct
relations to each other. Therefore, training and development activities are important
elements of the human resource management function of an organization. How
organizational performance is the actual output/results of an organisation obtained
when measured against its intended outputs (goals and objectives). Proposing that
organizational performance encompasses three specific areas of organizations’
outcomes financial performance (profits, return on assets, return on investment, etc.);
product market performance (sales, market share, etc.); and shareholder return
performance (total shareholder return, economic value added, etc.), which are the
three primary outcomes of corporate organisations being analyzed.
Furthermore, reviewing it theoretically with regards to theories on motivation of
transfer & expectancy theory. Motivation to transfer was hypothesized to connect
learning with individual performance change. To support the degree of transfer of
training desired, it is important to understand why individuals choose to apply their
knowledge, skills, and attitudes in their workplace. Several theories of human behavior
help us understand and predict behaviors that contribute to performance at work, as
well as clarify the motivation to transfer factor in Holton’s model including the theories
of expectancy, equity, and goal setting. At the beginning of the motivation cycle, effort
is a function of the value of the potential reward for the employee (its valence) and the
perceived effort-reward probability expectancy).
• Ukertor Gabriel Moti (Ph.D.), Department of Public Administration,
University of Abuja, Nigeria in his paper Human Resource Management
(HRM) in the Global Perspective: Theory and Practice emphasises the need
to search for new ways of working, the central role of managing in promoting change,
the treatment of workers as individuals rather than part of a collective workforce, and
the encouragement of workers to consider management as ‘partners’ rather than as
opponents – ‘us and us’, rather than ‘us and them’. These practical processes include:
workforce planning, recruitment (sometimes separated into attraction and selection),
induction and orientation, skills management, training and development, personnel
administration, compensation in wage or salaries, time management, travel
management (sometimes assigned to accounting), payroll (sometimes assigned to
accounting), employees benefits administration, personnel cost planning, performance
appraisal, etc.
The issues thus included were the variety of international organizational models that
exist, he extent to which HRM policy and practice should vary in different countries
(This is also known as the issue of Convergence and Divergence), the problem of
managing people in different cultures and environment the approaches used to select,

deploy, develop and reward expatriate who could be nationals of the parent company
or ‘third-country nationals’ (TCNs) – nationals of countries other than the parent
company who work abroad in subsidiaries of that organization. Therefore concluding
that because of cultural diversities and issues of convergence and divergence, it is
impractical to develop a truly international approach to global human resource
management. This means that organization structures, management styles, organization
cultures and change management programmes have to be adapted to the dominant
cultural attributes of the host nation just as a careful balancing act is sought between
being global and local needs.
• Osemeke Monday, Department of Business Administration, College of
Management and Social Sciences, International Journal of Economics,
Finance and Management Sciences, Samuel Adegboyega University,
Ogwa, Nigeria in his paper Human Resources Accounting: Issues, Benefits
and Challenges on Human Resources Accounting which has not been properly
integrated into the financial statement of various organizations and being regarded as
assets. The main purpose of his study was to examine the issues involved in valuing
human resource /people working in organizations, which has been regarded as the most
valuable assets in business organizations, the benefits of attaching values and the
challenges and obstacles of implementing the Human Resource accounting disclosures
of such values in the firm’s statement of financial position. In the pursuit of the focus
of his study the paper adopts exploratory and content analysis methods of secondary
data. The paper reveals that the exponent of human resources valuation models in most
cases have not dealt with the mode of recording and disclosure of the accounting
information relating to human resources in the books of account or financial statements
of the organization. In most cases, the human resource accounting information is given
in the form of supplementary information attached to the financial statements. This is
of great concern to accounting professionals and practitioners.
In the pursuit of the focus of his study he adopts exploratory and content analysis
methods of secondary data. He reveals that the exponent of human resources valuation
models in most cases have not dealt with the mode of recording and disclosure of the
accounting information relating to human resources in the books of account or financial
statements of the organization. He concludes that considerable research done is due to
the increasing importance of human capital in the economy to develop the concepts and
methods of valuing human resource that has been recognized as human resources
accounting (HRA), and that there is a great need for evolving a system of accounting
for human resource that is acceptable to professional accountants, mangers and other
decision makers – investors, creditors and other stakeholders.
• Anita Singh, Emerging Markets Case Studies, IMS Ghaziabad, India in her
paper Human Resource Accounting at Infosys- A Case Study collected data

using the information available on the annual report of Infosys. To identify is there
any correlation between the Human Resource Value of the Infosys and Revenue by
taking a significance level of 1% and using two tailed Z-test. It was observed that
Correlation can be applied to estimate the degree of closeness between the two variables
i.e. Human Resource Value of Infosys & Revenue. It showed how Infosys reaped
benefits using Human Resource Accounting. HRA helped Infosys to determine
whether its human asset was appreciating over the years or not. This information
was important for the company as its success depended solely on the knowledge of the
employees.
The study showed that growth of the company depends on its presence and value of
Human resource working in the organization. It necessarily means that if more is the
value of human resource, greater will be the revenue of the company. Further it can be
concluded that the total value added component of the company depends a lot upon the
human resource value of the technically skilled staff of the Infosys. So Infosys must
remain focused upon maintaining, developing, retaining and increasing their value.
This information can also be used by the company to compare the performance and
productivity of employees in various departments and retaining valuable employees.
HRA also helped in deciding the compensation of employees. The effort to quantify
human resources helped Infosys investors and other client’s true insights into the
organization and its future potential. It restored faith amongst shareholder
• Md. Nurun Nabi, Md. Syduzzaman, & Md. Shayekh Munir, Department of
Textile Engineering Management, Bangladesh University of Textiles,
Bangladesh in their paper The Impact of Human Resource Management
Practices on Job Performances: A Case Study of Dhaka Bank Pvt. Ltd.,
Bangladesh aimed on investigating and analyzing the impact of human resource
management practices on job performances with job satisfaction, training and
motivation, performance appraisal, team work and development, absenteeism and
turnover and analyzing the relationship between variables of job satisfaction and
performance appraisal in workplace and organization. The goal being to to find out: to
what extent are various models and diagram of HR development system and planning
are closely related to overall job satisfaction of the organization.
They attempted to examine and analyze the impact of human resource management
practices on job satisfaction of private sector banking industry in Bangladesh. In the
present study, the estimated regression model identified that the HRM practices like
Training, Performance Appraisal, Team Work, Absenteeism and turnover and
Compensation has significant impact on job satisfaction and job performances of the
organization. We have tried our outmost to show the result of how the HR elements
impacts of job performance. Where Motivation is more, the performance level is also
high. On the other hand Employee Participation and playing a active role in business

area has a great significant impact on job satisfaction of the employees of Dhaka banks.
Furthermore, recommending to build new policies to improve employee’s participation
at middle Managerial level and Top level management. Other practices like Training,
Performance Appraisal, Team Work and Compensation need to be maintained in order
to achieve high level of job satisfaction.

Data Analysis
I conducted a survey accordingly, collecting responses from employees of various age groups
to get an insight on employee’s perspective with regards to HRA & HRM.

10) Please indicate the possible reasons for introducing HRA system in an organization on a
scale of 1( not at all relevant) to 5(fully relevant):

11) Disclosure of HRA information is important to the following group of users (Please
indicate the degree of importance on a five-point scale, 1= ‘not at all important’ to 5= ‘very
important’)

12) The items relating to HR which should be disclosed by a company in its annual reports
are:(Please express your opinion on a five-point scale, 1= ‘strongly disagree’ to 5= ‘strongly
agree’)

Summary Of Findings
• The conducted survey had 50 respondents, of which 52% were female employees, and
48% were male employees.
• They were further classified into different working groups based on varying age limits.
50% of the respondents belonged to the age group of 21 years old and below, 36% were
of the age group 21 to 30 years old, 4% were of the age group 31 to 40 years old, 8%
were of the age group 41 to 50 years old, and 2% belonged to the age group of 51 years
old and above.
• When asked about how long they’ve been working at their present organization, a
majority of 46% claimed to be working for 6 months or less, 20% claimed to be working
for over 6 months and less than a year, 8% claimed to be working for over a year and
less than 3 years, and 26% claimed to be working for over 3 years in the same
organization.
• 78% of the respondents were happy to deliver their efforts at their workplace, whereas
22% weren’t happy to be delivering their efforts at their current workplace.
• When asked if they’d help out their employer in a situation of crisis, and take initiative
in advance before being asked to do so, 80% of the respondents were willing to do so,
whereas 20% of the respondents weren’t willing to take initiative in advance.
• When it comes to skipping work, 66% of the employees liked to be absent frequently
from work, while the remaining 34% preferred to be present rather than absent at their
workplace.
• When the respondents were questioned whether they’d like to give professional
assistance to their colleagues or subordinates at work, 84% of them were willing to do
so, whereas 16% of them didn’t prefer it too much.
• Furthermore, they were asked about their views on corporate governance and whether
they thought it was oppressive for employees. About 38% of the respondents strongly
agreed to the corporate governance being oppressive for employees, and a majority of
50% moderately agreeing to the same. Whereas, only 10% disagreed with the statement,
and a minority of 2% strongly disagreeing.

• Over 76% of the respondents have a Human Resource Accounting System at their
current workplace, whereas the remaining 24% didn’t.
• Later on they were asked to rank the relevancy of possible reasons for introducing an
HRA system in an organization. 38% of the respondents chose level 5 i.e. fully relevant
to the reasons listed in the questionnaire provided to them, 32% of them chose level 4
of relevancy, 23% chose level 3, 5% chose level 2, and 2% chose level 1 i.e. not relevant
at all for the reasons listed below:
a) To help management plan and control the use of human resources effectively
and efficiently.
b) To motivate management to adopt a human resource perspective in their
decisions.
c) To provide the organization with a more accurate accounting of its return on
total resources employed, rather than just the physical resources.
d) To improve the bases for investors company-valuation.
e) To provide monetary arguments for human resource specialists, company
doctors or unions when suggesting investments in human resources.
f) To improve the management of human resources from an organizational
perspective by increasing the transparency of human resource costs,
investments and outcomes in the management accounting rituals, such as profit
and loss accounts, balance sheets and investment calculations.
• A whooping majority of 30% of the respondents rated level 5 with regards to the
importance of disclosure of HRA information to the shareholders, creditors,
employees/union, management, government, customers, and financial analysts. A tie of
20% was observed between rankings of level 4, 3 & 2. And, the remaining 10%
completely disregarded with the importance of disclosure to the listed parties,
• At the end, they were asked to rate the relevancy of disclosure of certain items relating
to HRA in the company’s accounts. A majority aggregate of 50% rated 5 points on the
scale. A tie of 20% was observed with the rankings of level 4 & 3. 10% of the
respondents chose level 2, whereas none of them chose level 1 i.e. 0 importance or
relevancy.

Conclusion & Recommendations
It was observed that the respondents were quite dissatisfied at their workplace for a number
of reasons. Majority of them preferred to be absent, and weren’t very willing to step up and
take initiatives. This might be possible due to lack of incentives and motivation, or no proper
job appraisal. The disclosure of HRA in the books of accounts for various reasons, and also to
the outsiders and people connected to the organization should be done were strongly
expressed by the respondents, with a view to create awareness, inform others and also to gain
recognition and transparency.
Human resources (HR) and accounting are both crucial areas in most companies, yet they
often operate in silos, functioning independently. But more and more businesses are realizing
this practice needs to change, and there’s a growing recognition of the critical role that
employees play in the financial success or failure of a company.
Under the traditional business model, employees were often considered an expense. The cost
of salaries, benefits, hiring, and firing received much more attention than the critical
contributions that employees made to the company. Now, as companies better recognize the
role that employees play in business success, things like employee output, knowledge,
creativity, and problem solving are valued more highly and are seen as critical revenue-
producing or profit-contributing assets.
This growing appreciation has led to increased focus on human capital management strategies
in order to maintain, protect, and expand employee resources. There are three major steps you
can take to align HR efforts more closely with the company’s financial systems: (1) realign
company strategy to incorporate improved human capital development and management, (2)
develop a dynamic recruitment program that aligns with company strategy, and (3) develop
new measures of success and improved employee retention systems. The end result most
likely will lead to increased profitability and greater business success.
To improve human capital management systems, begin by incorporating the role of
employees into the business strategy. For example, the finance team can help look at
historical numbers to create written goals for the leaders of each department. A company
should define the role of support staff for the sales team to illustrate precisely how their day-
to-day work effectively supports the company’s goal of increasing sales.
Developing a more people-focused business strategy makes it that much easier to recruit the
right individuals to implement that strategy. And the importance of having the right people in
place can’t be overstated. While people are a company’s greatest asset, job turnover is its
biggest expense. Studies have shown that replacing an employee can cost on average as much
as 200% of the base salary of the previous employee in that same position.

The goal for all companies should be to create a safe environment for people to work and
thrive in. Seek to hire leaders who understand life’s challenges and who will work with
employees and be flexible when needed, as long as the work is getting done.
A good work environment also features a culture that removes the fear of making mistakes.
At the same time, of course, it’s also important to manage quality. One effective strategy for
creating this balance is to have a position within the organization that interacts with staff on a
daily basis to ensure quality and uniformity of work.
At least four generations of workers currently are in the workforce, including Millennials and
Baby Boomers, so a company must find out what its prospective employees value. With such
a wide range of workers, this can vary considerably. Are they pursuing a career or simply
looking for a job? Do they want to have fun at work? Are they interested in having a
company invest in their technology skills?
Baby Boomers often want to work for managers they respect. They are also often attracted to
great benefits and prefer to work close to home. In comparison, Millennials are frequently in
search of a workplace that offers flexible hours in a fun environment or the flexibility to work
at home on occasion.
While their motivations may vary widely, most people want to work for a company that cares
about them. Going back to the importance of culture, employees don’t join a company to live
in fear of an angry e-mail or phone call from a manager or a valued client. People join
companies and quit bosses. With that in mind, a company’s goal should be to create a unique
culture and meaning within the organization. The company must provide clear reasons that
would make people want to work for it.
A good start is to define the motivations of prospective employees and list the financial and
nonfinancial benefits of working for the company. This can be of great assistance down the
road. For instance, it will be easier for interviewers to generate more meaningful interview
questions that help identify the right candidate for the job. Interviews should begin by asking
questions centred on the candidate’s values and mind-set before progressing into skill sets
and experience. This will identify those candidates most likely to be in alignment with the
client acquisition and retention strategy at the core of the company’s business plan.
In addition to understanding the motivations of prospective employees, it’s often a good idea
to proactively consider skills and personality traits when listing the criteria for ideal hires.

This not only helps ensure that the right people are hired for the right job, but envisioning the
ideal candidates also helps determine where to look to find the perfect match.
Candidates who enjoy solving problems often become top performers. In an accounting
department, managers might look for people who are accountable, enjoy working as part of a
team, and are passionate about gaining more knowledge. Knowledge-seeking workers gain
considerable job satisfaction when their ideas or contributions to a strategy lead to direct
revenue or profit improvement. And if the decision comes down to a candidate with a higher
skill level vs. one who is a better cultural fit, it’s almost always better to hire the person who
best fits the culture. Hire employees for attitude. Train them for skills. Skills and problem
solving can be taught, but it’s difficult to change an individual’s attitude.
Also remember the generational differences. When recruiting team members from either
Generation X or Y, place an emphasis on seeking candidates who hope to work with
inspirational people as well as candidates who are interested in achieving work-life balance.
When targeting Baby Boomers, keep in mind that they are interested in comprehensive health
insurance coverage and retirement plans. They also are frequently described as being
interested in working with managers they respect.
It is often said that the best salespeople are motivated by both money and recognition.
Tracking and identifying exemplary sales efforts are easy. Workers in other departments
crave the same recognition, but their contributions often can be much harder to measure and
are rarely communicated. When it comes to employee retention and preventing the negative
human and financial impacts of turnover, employee recognition is one of a company’s most
crucial tools. But no two employees are the same. As a result, when recognizing employees, a
company should know what those employees value the most: time or money. If the answer is
time, one popular perk is flex-time Fridays.
When it comes to recognition, incentive compensation must be tied to results, not activity.
Also, there should be a line of sight between employees’ activities and the results they are
measured on. Incentive pay must correlate to the key drivers of the business and the recently
updated business plan.
Developing incentive pay measures for service employees is a much more difficult task.
Having access to accurate job costing data is essential. Time-driven activity-based costing
(TDABC) helps to automatically allocate labor costs to the clients or projects the employees
are working on. This provides a view of real profitability by client, project, and employee.
Businesses need concrete ways to measure both customer and employee satisfaction. They
should closely track unplanned employee turnover and recognize that planned turnover

should be expected and is natural. Planned turnover can be easily identified and managed
when managers have regular, honest discussions with employees about their career goals.
Incentive plans should be structured with three levels. The first level is a baseline goal, below
which nobody gets a bonus. Next is a budget goal. This level is a target incentive
compensation goal the company can afford and is in line with its competitors. The final level
involves stretch goals. These can be determined by identifying additional key business
drivers, which are then tied to an incremental goal.

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