HR ACCOUNTING

& HR AUDIT
HUMAN RESOURCE ACCOUNTING
 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.

 OBJECTIVES OF A HR
ACCOUNTING SYSTEM
 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.
 HUMAN RESOURCE
ACCOUNTING METHODS
 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

 IMPORTANCE OF HRA
 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

 HR AUDIT INTRODUCTION
 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.
HR AUDIT
PROCESS
MAIN AREAS IN HR

 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
BENEFITS OF HR AUDIT
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