Human resource accounting

HRA is a sophisticated way to compute (in financial terms) the efficiency of personnel management activities and the utilization of people in an organisation. It is the procedure of accounting for people like an organisational resource. It attempts to place a value on organisational human resources as assets and not as costs. The HRA process indicates the investment the organisation makes in its people & how the value of these people changes over time. The gaining cost of workers is compared to the replacement expense from time to time. The value of workers is enhanced by investments made by the company to develop the quality of its human resources like development, training and skills attain by worker over a period of time through experience, etc. While qualified, competent people leave an organisation, the value of human possessions goes down. In this technique, employee performance is evaluated in terms of expenses and contributions of worker. Human resource costs include expenditure incurred by the company in training, hiring, compensating and developing people. The contributions of human resources are the currency value of labour productivity. The price of human resources can be taken as the standard. Workers performance may be measured in terms of workers contribution to the organisation. Workers performance may be taken as positive while contribution is more than the performance and cost can be viewed as negative if cost is more than contribution. Positive performance may be measured in terms of percentage of excess of worker contribution over the cost of employee. In the similar manner negative performance can be calculated in terms of percentage of shortage in workers contribution compared to the cost of workers. These percentages may be ranked to 'Zero Level' as shown in the Box.

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