HR ACCOUNTING

By
Prof.Dr.C Sevithaya
Principal, HKBK Degree College.
Shazia Anjum
HOD Department of Commerce & Management
HKBK Degree College
Abstract

Human Resource Management is one of the oldest functional area

of management, which is emerging at a rapid speed posing new
challenges for the organization in todays context.
New roles of HR professionals are the outcome of societal changes,
changes in government policies, Technology, changes in life style,
Employers expectations etc.
The Present paper concentrates on HR accounting & methods
implemented in Human Resource Management.
Introduction

Human resource accounting is the process of identifying and

reporting investments made in the human resources of an
organization that are presently unaccounted for in the
conventional practices.
HR accounting furnishes 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 &
enabling the organization to have an analysis of the human assets
i.e. to conserve/ deplete or to appreciate the employees.
Objectives of the study

To extract information on the different methods of HR accounting

adopted by the organization
An attempt to know the cost of maintaining Human Resource i.e.
employees.
To know the cost of training & development of Human Resource
To know the importance of Human Resource Accounting in an
organization
Statement of the Problem

HR accounting has to be implemented effectively so as to reduce

and control the cost associated with the procurement,
development and maintenance of employees.
In this regard, the research was carried on to know the accounting
methods implemented by the different organization with regard to
cost control & cost reduction.
Research Methodology

This is descriptive study based on primary & secondary data.

Sources of data : Primary data is collected through questionnaire
Secondary data: Information related HR Accounting is collected
through various websites, Journals & Books.
Sample Size : Information is gathered from 45 respondents.
Sampling Technique : Random Sampling technique is used to select
the sample.
Data Analysis : After Collecting the data, a thorough check was made
to include only those questions that were complete in all aspects. The
data was interpreted by using simple percentage, table & graphs.
Limitations of the Study

The Study is restricted only to Bangalore.

Limited information due to shortage of time
Some of the employees were hesitant to reveal information for the
study.
Most of the employees were not sure about cost reduction
techniques adopted by their organization.
Analysis & Interpretation

1. Chart Showing existence HR department in an organization

Separate HR Department

From the above chart it is clear

Yes that 78% of the organization has
No separate HR Department in their
organization.
2. Chart showing Organization allocating
budget for HR Department separately

11; 24.44% From the above chart it is clear that 76%

of the organization has separate budget
Yes
allocated to their HR Department & 24%
No does not allocate separately.

34; 75.56%
3. Chart showing the HR accounting methods
adopted by the organization

30 29

25 From the above chart it can be

20 analyzed that Replacement cost
method is commonly used in
15
10 most of the organization i.e.
10 29%, 10% of the organization
5
3 3 uses Opportunity cost , 3% of
the organization uses Historical
0
Historical Cost Approach Replacement Opportunity Cost Don't Know approach method .
4. Chart showing Labour Turnover rate

Labour Turnover Rate

From the above chart it is clear that,
labour turnover rate is 45% between
the scale of 10% - 20% & 22% between
6; 13.33%
10; 22.22% 0-10% 0 10%
10% - 20%
20 - 30%
9; 20.00%
30% & above

20; 44.44%
5. Chart Showing recruitment in an organization

Recruitment

From the above table & chart, it is

clear that Organization recruit
Every Month
employee every month i.e. to an
Six Months Once
Once in aYear
extent of 73%, 22% every six months
once and 5% once in a year.
6.Chart showing Orientation/ Induction training to employees.

Orientation/Induction Training
40
38
35 From the above chart it can be
30 analyzed that 38% of the organization
25 provides Orientation/Induction
20 training to their employees.
15
7
10
5
0
Yes No
Orientation/Induction Training
7. Chart Showing Cost of Orientation / Induction Training

Cost of Orientation/Induction Training

From the above chart, it is clear that
83% of the cost of training lies
1.2; 3.97%
4; 13.25% between Rs. 50,000 to 1,00,000.
Less than 50,000
50,000 - 1,00,000
Above 1,00,000
Don't know

25; 82.78%
 8. Chart Showing the Sources of Recruitment

Sources of Recuritment
30
25
25
From the above chart, It is clear that
20
15
Employee reference is the commonly
15
10 10 10
used source for the recruitment i.e.
10
25%, followed by Advertisement &
5
Consultancy at 10% each. Some of the
0
t y t s
organization uses all the three
ce en nc en ce
rn
Re
f e
tis
em ul ta
tis
em so
ur
sources i.e. 15%.
r ons r ee
ee ve C ve hr
oy Ad Ad T
pl & Al
l
Em ce
ren
fe
Re
e
o ye
pl
Em
 9. Chart Showing the Cost incurred by each of source of recruitment.

Cost incurred
25

From the above chart, it is

20
20 clear that cost incurred by
all the sources lies between
15 2 4 Lakhs I.e. 20%, 10% lies
10 10
between 0 2 lakhs & 4-6
10
Lakhs.
5
5

0
0 - 2 Lakhs 2 - 4 Lakhs 4-6 lakhs Aove 6 Lakhs
10. Chart showing Retrenchment Policy

Retrenchment Policy Existence

From the above chart , it can be analyzed
that 71% of organization has Retrenchment
policy.

Yes
No
 11.Chart showing Impact of Retrenchment Policy on Employees Performance

Impact of retrenchment Policy on Employees Performance

It is clear from the chart that
78% of the HR managers are of
the opinion that it does not
10; 22.22% affect the employees
Yes performance.
No

35; 77.78%
Findings
About 35% of the respondents reported that their Organization has separate HR
Department & 34% of them reported that their Organization allocates separate
budget for the HR Department.
The Study revealed that Employee Reference is the most commonly used source of
recruitment.
The Study also revealed that the labour Turnover rate lies between 10% to 20% i.e.
20% labour turnover takes place a year.
It was also found out that Replacement cost method is the commonly used HR
accounting method by the organization.
The study also revealed that 38% of the respondents gets induction training from
the organization.
It was also found out that 32% of the Organization has retrenchment Policy .
It was also revealed that 35% of the respondents are of the opinion that
retrenchment policy has not affected the employees performance.
Suggestions

The Organization should ensure that they have HR Accounting

System.
The Organization should provide thorough details with respect to
cost reduction techniques and methods adopted by them.
The Labour turnover rate should be reduced.
The Organization should implement the HR accounting Models.
The Organization as far as possible should make an attempt to
provide data on the methods of HR accounting & its
implementation.
Conclusion

From the above suggestions we can conclude that the organization

should implement HR accounting techniques so as to know the cost
of Human resource procurement, development & maintenance
cost by the evolution of proper Hr Models.
It is one of the important factor to be considered in the policy of
an organization.