HUMAN RESOURCE ACCOUNTING Definition
Assigning, budgeting, and reporting the cost of human resources incurred in an organization, including wages and salaries and training expenses. Measurement in HRA
The biggest challenge in HRA is that of assigning monetary values to different dimensions of HR costs, investments and the worth of employees. The two main approaches usually employed for this are:
1. The cost approach which involves methods based on the costs incurred by the company, with regard to an employee.
2. The economic value approach which includes methods based on the economic value of the human resources and their contribution to the company’s gains. This approach looks at human resources as assets and tries to identify the stream of benefits flowing from the asset. The methods for calculating the economic value of individuals may be classified into monetary and non-monetary methods. Monetary Measures for assessing Individual Value a) Flamholtz’s model of determinants of Individual Value to Formal Organizations
According to Flamholtz, the value of an individual is the present worth of the services that he is likely to render to the organization in future. As an individual moves from one position to another, at the same level or at different levels, the profile of the services provided by him is likely to change. The present cumulative value of all the possible services that may be rendered by him during his/her association with the organization is the value of the individual.
b) Flamholtz’s Stochastic Rewards Valuation Model
The movement or progress of people through organizational ‘states’ or a role is called a stochastic process. The Stochastic Rewards Model is a direct way of measuring a person’s expected