Human Resource Cost Approach: Methods Of Valuation Of Human Resources
Methods of valuation of human resource:
Actually, the Valuation of the human asset is the most critical aspect of HRA. How to assess the value of human resources? There are a number of approaches have been suggested for this measurement by researchers. These approaches may broadly be classified into two types: human resource cost approach or human resource value approach as illustrated below (Oluwatoyin,2014, Mehra et al., 2014, Ganta et al., 2014, Dhaka et al., 2013, Guduru et al., 2013,Andrade et al., 2011,Asif, 2010, Maheshwari et al., 2009, Spitteler et al., 2009):
A- Human Resources Cost based approach:
The focus of the cost approach is the expenditure incurred for recruiting, training and improving the quality of the Employees. A brief summary for these methods is given below (Pandurangarao et al.; 2013):
(1)- Historical Cost Approach:
The historical cost of human resources is the sacrifice that was made to acquire and develop the resource. These include the costs of recruiting, selection, hiring, placement, orientation, and training. This model suggests that instead of charging the costs to profit and loss account; it should be …show more content…
Standard cost is fixed for each category of human resources. Although this method is simple, however it does not take into account the difference between human resources placed in the same category.
B- Human Resources Value based models:
The concept of human resource value states that all human resources possess value because they are capable of rendering future service. According to these models, the economic value of human resources is determined based on their contribution to the entity’s gains using the present worth of the services that they are likely to render in future. A brief summary for these models is as follows:
(1) - Present value of future earnings
Actually, the Valuation of the human asset is the most critical aspect of HRA. How to assess the value of human resources? There are a number of approaches have been suggested for this measurement by researchers. These approaches may broadly be classified into two types: human resource cost approach or human resource value approach as illustrated below (Oluwatoyin,2014, Mehra et al., 2014, Ganta et al., 2014, Dhaka et al., 2013, Guduru et al., 2013,Andrade et al., 2011,Asif, 2010, Maheshwari et al., 2009, Spitteler et al., 2009):
A- Human Resources Cost based approach:
The focus of the cost approach is the expenditure incurred for recruiting, training and improving the quality of the Employees. A brief summary for these methods is given below (Pandurangarao et al.; 2013):
(1)- Historical Cost Approach:
The historical cost of human resources is the sacrifice that was made to acquire and develop the resource. These include the costs of recruiting, selection, hiring, placement, orientation, and training. This model suggests that instead of charging the costs to profit and loss account; it should be …show more content…
Standard cost is fixed for each category of human resources. Although this method is simple, however it does not take into account the difference between human resources placed in the same category.
B- Human Resources Value based models:
The concept of human resource value states that all human resources possess value because they are capable of rendering future service. According to these models, the economic value of human resources is determined based on their contribution to the entity’s gains using the present worth of the services that they are likely to render in future. A brief summary for these models is as follows:
(1) - Present value of future earnings