Human Resource Costs
Costs incurred on locating, selecting and training employees are the capital component of investment in human resources. These are similar to the costs of fixed assets, e.g., purchase price and cost of installation. Some of these Costs are direct (e.g., time spent on training) while others are indirect (administrative expenses on training) The costs of human resources may be classified as follows:
1. Recruitment Costs
It is the cost incurred to identify sources of human resources both from within and outside the organization. For example, cost of recruiting materials, administrative expenses, advertising costs, agency fees, recruiter’s salary and travel and outstation costs.
2. Selection Costs
It depends on several factors such as the type of personnel being recruited and the method of recruitment. The cost of selection depends on the position for which a person is being selected. The higher the position, the greater is the selection cost. It includes cost of application blanks, administrative cost of processing applications, conducting tests, interview, medical examination and the Salaries, materials and consulting fees of the selectors.
3. Hiring and Placement Costs
In deciding upon the placement, the individual’s ability, attitude, interest, temperament and aspirations are taken into consideration with reference to the job requirements. The cost of placement can be collected for the purpose of human resource accounting. Travel expenses to select employees, expenses for moving to the firm’s place, etc.
4. Orientation Costs
Costs incurred to familiarize the new employees with policies, facilities, products, etc. of the firm.
5. Training Costs.
Training costs include, cost for induction period, cost of remuneration for the trainee and trainer, cost of travel for the trainee and the trainer, if any, cost of training materials, imputed cost of machines and equipments, used during the training, cost for development of training modules, cost of training evaluation, cost of material wastage during training, if any, cost of production loss for the trainee and the trainer (if he is within the organization, for in-house training), etc.
6. Development Costs.
Costs incurred to increase the employee’s capabilities beyond immediate skills required for the job, advancement. This involves cost such as delegate fees, the travel cost, loss of output during the development programme etc. which are to be accounted for as a human resource investment
7. Relocation Costs
Many organizations have their policies on periodic relocation of employees as part of their restructuring exercise. This is more appropriate for those who have their units in multiple locations. Such decisions from organizational point of view, involve cost related to disturbance allowance, cost of possible litigation, cost of housing, cost of travel, etc.
8. Separation Costs
Relocation also induces separation. There may be other reasons for separation, which may be either for organizational initiative or for individual employees‟ reasons. Since separation requires replacement, immediate cost effect is on loss of production. Other costs of separation are redundancy benefits (if separation is organization induced), ex-gratia payments (if any), etc. Since separation follows immediate liquidation of fringe benefits, savings of the organization on this course also need to be considered to compute the actual costs.
9. Support Costs
Some of the employee support services are statutory, while others are offered voluntarily by the organizations. For computing support costs, therefore, it is necessary to distribute these under two different heads and then study their impact. Medical welfare, canteens, safety, security, insurance, death benefits, parking space costs, etc. are some of the statutory costs for employee support services. While house journal, club membership, music at workplace, long service awards, suggestion schemes, library services, holiday homes, etc., are examples of voluntary support services for employees.