What is the Cost of Human Resource?
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.