The document discusses human resource accounting (HRA), which involves identifying, measuring, and communicating information about a company's human resources in order to facilitate effective management. HRA helps determine the costs associated with recruitment, training, salaries, and benefits for employees, as well as their contributions to company profitability. It allows companies to monitor and analyze their human assets and make informed decisions regarding staffing, promotions, transfers, and restructuring. The document also outlines several methods for valuing employees through HRA and explains how HRA can benefit both management and employees.
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HRA Process and Methods for Effective Management
1.
2. HRA is a process of identifying, measuring and communicating information
about human resources in order to facilitate effective management within an
organization.
Is the activity of knowing the cost invested for employees towards their :
Recruitment & Selection
Training & development
Payment of salaries &
Other benefits
and knowing their contribution to organization towards it's profitability.
3. To monitor effectively the use of human resources by the management.
To have an analysis of the human asset
It facilitates valuation of human resources, recording the valuation in the
books of account and disclosure of the information in the financial
statement.
It is to help the organization in decision making of:
Direct Recruitment Vs promotion.
Transfer Vs. Retention.
Retrenchment Vs. Retention
Decision on reallocation of plants, closing down existing units and
developing overseas subsidiaries etc.
4. Standard Cost Method: It involves determining the total cost of
recruiting and hiring each employee, as well as the cost of any
training or development.
Replacement Cost Method: It values an employee in terms of the
amount it would cost the company to replace him.
Opportunity Cost Method: It assigns value to an employee based on
what each department would be willing to pay him.
Economic Value Method: It estimate the total inflow of cash - total
cost involved in the employee
5. Helps the management in the employment, locating and
utilization of human resources.
Helps in deciding the transfers, promotion, training and
retrenchment of human resources.
Provides a basis for planning of physical assets (human
resources).
It helps employees in improving their performance and
bargaining power.
It helps in locating the real cause for low return on investment
6. HR audit is a way to diagnose problems in a company’s
HR department.
HR audit can be done through self-assessment,
internally, or can be done by hiring a professional audit
company, to undertake an audit.
HR audit and the subsequent HR audit report will
pinpoint where there are weaknesses or risks in the HR
department and help address these.
8. The company’s recruitment process
Benefits and compensation processes
Contracts and employee handbooks
How employee performances are evaluated
Training and education programmes
HR strategy
Hiring and firing practices
Exit procedures
9. Provides verifiable data on the HRM functions
Clarifies the HR functions
Indentifies critical HR problems
Improves the status of HR functions
Helps review and improves the HRIS