The Cost of human resources can be categorized into Acquisition cost, Training and Development cost, Welfare Costs and other Costs as discussed in this piece.

Acquisition Cost

This refers to the cost of attracting suitable staff. Includes the entire amount expended during recruitment, selection and placement. In Recruitment: The organization may incur certain costs to identify the right human resources either form within or outside the organization. The organization may need to incur cost of producing recruiting materials, administrative expenses, and cost of placing advertisements in print media, running social media advertisements, payment of agency fees for those using recruiting agencies and payment of daily subsistence allowance for the recruitment staff when traveling outside the station.

When it comes to selection, the organization further incurs costs depending on the method deployed in selecting a suitable candidate. These costs range from administrative costs, cost of processing applications, design and conducting of tests, interviews, medical examination, allowances, stationery and consultancy fees for organizations that have deployed the services of recruiting firms.

Once the organization has managed to select the most suitable candidate, it may further incur placement cost in deciding where to post the candidate. It has to take into consideration a number of factors, namely, the individuals’ interests, ability, attitude, aptitude. Such placement costs are also important for the purposes of human resource accounting.

Training and Development Cost

Training costs covers investments made in improving the staff to the expected level of performance. This can be in form of training and capacity development programmes. It can also include the time spent to mentor and coach the employee and honing his skills for greater productivity and improving his/her potential to take up higher responsibilities within the organization as per the organization’s career progression guidelines.

Welfare Cost

Effective human resource management takes care of welfare cost. This covers the cost incurred by the organization to ensure that the employee enjoys a favorable working environment. It is important for the management to provide all the necessary resources to ensure that the employees can work in a healthy environment that boosts their morale and by extension improve their level of productivity. Welfare Costs can be incurred within or outside the organization. Within the organization, there are facilities such as washroom, running water, occupational safety equipment among others. Welfare costs outside the organization include health insurance, social security, housing, motor vehicles wide range of leave benefits among others.

Other Costs

The management may incur a range of other costs such as those related to cost of safeguarding health of workers which includes  cleanliness, waste disposal, ventilation and air conditioning, artificial humidification, fumigation, Lighting, Drinking water. Other costs relate to employee safety, such as fencing of machinery, casing of lifting machines, ear and eye protectors. Lastly, other costs relate to welfare of workers such as washing facilities, rest rooms, and canteens among others.

Definition

It can defined as a system of accounting that identifies, quantifies and measures human resources for the use of the management to maintain a balance between the required material resources and the available human resources. It involves valuation, recording and systematic presentation of the worth of human resources in the institution’s books of account.

Objectives of Human Resource Accounting

Improve management by analyzing investment in Human Resources: Human Resource accounting is an important tool for management since it helps in analyzing the level of investment in Human resources. This enables managers to invest optimal level of resources in relation to the available human resources.

Consider people as its asset: Human Resource Accounting serves to the concept that employees constitute the organization’s most valuable assets and as such it is important to acknowledge the worth and maintain accurate records of the skills and competencies that contribute to the organizations objectives.

Attract and retain qualified people: Human Resource accounting helps the organization to attract and retain talents in order to achieve and maintain a competitive advantage.

Profile the organization in financial terms: Human resource Accounting helps to build a profile of the organization in financial terms. There are quite a number of aspects of human resources which for a very long time have not been analyzed from a financial perspective. Human Resource Accounting therefore provides a basis of valuation of such qualitative aspects in order to develop an organizational profile that can assist in financial decision making.

Planning and Control: Human resource accounting is an important tool in planning and control. It is a critical component of Strategic Human Resources that seeks to have human relation at the center Strategic management. Thus, it informs the extent of human contribution to the realization of the organizational objectives.

Complexity in the policy framework:  The International HRM provides a broader framework for the study and analysis of a wider range issues that are relevant at the global spectrum. These include issues include but not limited to:  foreign cultures, living standards, tax policies, issues of difference in the values of foreign currencies, and postings, time’s differences and many other (Collings & Scullion, 2012).  These present significant challenges to the HR professionals working for the Multinational Corporations and the International Civil service institutions like the UN and other inter-governmental bodies.  All the variables mentioned have to be taken into consideration by the management while making certain managerial decisions. This makes International Human Resource management applicable in global firms like Unilever, GlaxoSmithKline, Samsung and the likes to be more complex.

Multiplicity of nationalities and diverse cultures: International human recourse management handles staff drawn from various countries with diverse cultural practices, values, social norms and language. This presents a significant challenge to Human resource practitioners keen on developing uniform standards and unique organizational culture for the international entities. Issues such as culture shock on an employee posted to a foreign country have to be dealt with. There can also be failure by the expatriate to understand the local culture of the host community. This can hamper the realization of the organizational objectives (Lee, 2007). Therefore multiplicity of nationalities and diversity of culture contradistinguishes International HRM and Domestic HRM.

The scope and nature of human relations: When it comes to employee relations there is a significant difference in how International human resource varies from domestic human resources in terms of the focus on the personal lives of the employees in an international context. Family life, schooling of the employee’s children and welfare of family members have to be taken into consideration in the management of human resources (Bonache & Stirpe, 2012).  Domestic HRM may not focus much on more intimate issues concerning the employees thus bringing out the difference in that regard.

More Risk exposure: The international Human resource management framework has to be in cognizance of the risk inherent in various parts of the world where the organization may have extended its operation. Geo-political issues such as conflict and political instability in places such as South Sudan, Somalia, DRC presents a considerable challenge to expatriates in those countries. It is therefore the work of the international human resource management practitioner to meet the specific needs of employees confronted by such situations which is not an easy task. On the other hand domestic human resource management only has to deal with local socio-cultural issues.

Training and Capacity Development needs: Within the context of International human resources, training and capacity building is also quite complex. A firm’s level of internationalization affects decisions related to training and capacity development.  Difference in training methodologies and difference in basic education curriculum in various countries makes decision making a bit complex.  Standardization of training solutions therefore becomes more difficult to the IHRM practitioner.

Remuneration: Global firms and intergovernmental organizations face considerable difficulty in developing a globally competitive remuneration package. It has to consider a host of issues, namely, the respective Country’s legislations relating to employment and labour relations; taxation regimes, variation in the cost of living, economic conditions such as the rate of inflation, prices of commodities among others. Therefore the International human resource practitioners must come up with remuneration package that is globally competitive (Dowling & Welch, 2004).

References

Agarwala, T. (2007). Strategic Human Resource management, 1^st ed. Oxford University, UK.

Bonache, J., & Stirpe, L. (2012). Compensating global employees. In Handbook of Research in

            International Human Resource Management (2nd ed.; pp. 162–182). Cheltenham, UK: Edward

Elgar Publishing Limited.

Collings, D., & Scullion, H. (2012). Global Staffing. In Handbook of Research in International

Human Resource Management (2nd ed.). Cheltenham, UK: Edward Elgar Publishing Limited.

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Dowling,  J., & Welch, E. (2004). International Human Resource Management. Managing People

in a Multinational Context (4th ed.). Thomson Learning.

Friedman, T. (2005). The World is Flat: The Globalized World in the Twenty-first Century. London:

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Lee, W. (2007). Factors that influence expatriate failure: An interview study. International Journal

of Management, 24(3), 403–413.