Benefits of Human Resource Accounting
i. It checks the corporate plan of the organization. The corporate plan aiming for expansion, diversification, changes in technological growth etc. has to be worked out with the availability of human resources for such placements or key positions. If such manpower is not likely to be available, HR accounting suggests modification of the entire corporate plan.
ii. In the field of managerial decision-making, HRA would help in making meaningful choices between various types of investments inhuman resources and other assets.
iii. Human resource accounting identifies H.R. as valuable assets which helps in preventing misuse of human resource by the superiors as well as the management.
iv. It helps the management in planning and executing personnel policies and plans pertaining to the recruitment, transfer, promotion and retrenchment of human resource.
v. It helps to identify the causes of high labour turnover at various levels and taking preventive measure to contain it.
vi. It helps in locating the real cause for low return on investment, like improper or under-utilization of physical assets or human resource or both.
vii. It helps employees in improving their performance and bargaining power. It makes each of them to understand his contribution towards the betterment of the firm vis-à-vis the expenditure incurred by the firm on him.
Limitations of Human Resource Accounting
i. The life of human resources is uncertain and, therefore, valuing them under uncertainty seems unrealistic.
ii. There is a possibility that HRA may lead to dehumanizing and manipulation in employees.
iii. There is no proper clear-cut and specific procedure or guidelines for finding cost and value of human resources of an organization. The systems which are being adopted have certain drawbacks.