• HR Costing and Accounting

    HR costing and accounting refers to all the costs involved in different HR processes. The main objectives of this HR costing and accounting are to assign monetary value to employee behavior like absenteeism, turnover, job-performance and employee attitude and to assign monetary value to HR activities like recruitment, training and appraisals.

    Objective of HR Costing

    • To reduce the costs of HR by devoting resources to the more controllable factors.
    • Identify for each HR decision, which costs are controllable and which are not.
    • Measure these costs at a time prior to some intervention designed to reduce controllable cost and then again after the intervention.

    Behavior Costing Approach

    • Controllable Costs: The costs that are controllable through prudent HR decisions. Examples of controllable costs are employee salary, more opportunity for promotion and career development or greater job challenge.
    • Uncontrollable Costs: The reasons for these costs are beyond the control of HR department. Examples of uncontrollable costs are poor health, sudden death, sudden transfers etc.

    Employee Absenteeism refers to failure of an employee to report for or to remain at work as scheduled, regardless of reason. The advantages of reducing absenteeism include improved productivity of supervisors and reduced stress and wear and tear of employees.

    Cost factors to be considered due to employee Absenteeism

    • Employee hours lost due to absenteeism.
    • Cost of employee salaries and benefits.
    • Supervisor salaries and benefits.
    • Other costs, such as overtime, wages for temporary help, production loss, inefficiency of temporary substitute and maintenance of resource pools.

    Employee Turnover

    Employee turnover refers to any permanent departure beyond organizational boundaries. It is calculated as

    Rate of turnover  =  (No. of turnover incidents per period/Average Work Force Size)*100

    Employee turnover Types

    • Voluntary or controllable.
    • Involuntary or uncontrollable.
    • Functional: Turnover beneficial to organization.
    • Dysfunctional: Organization may like to retain the employee

    Components of turnover cost

    • Separation Cost – Exit Interviews, Administrative functions related to termination and Separation pay
    • Replacement Cost
    • Costs to recruit employees to replace those who have left
    • Training Cost to provide adequate training for the new employees

    Recruitment Costs

    The main recruitment costs are

    • Communicating job availability
    • Pre-employment administrative functions
    • Entrance tests and interviews
    • Staff meetings
    • Travel and moving expenses for interview panel and HR personals
    • Post employment acquisition and dissemination of information
    • Medical Examinations
    • Premium for fresh insurance scheme for new employees
    • Expenses for Induction trainings and other¬†training
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