Limitations 0f HR Accounting

[Suraya Yasmen]

Limitations 0f HR Accounting

Human resource accounting is the accounting methods, systems, and techniques, which coupled with special knowledge and ability, assist personnel management in the valuation of personnel in their knowledge, ability and motivation in the same organization as well as from organization to organization. It means that some employees become a liability instead of becoming a human resource. HRA facilitates decision making about the personnel i.e. either to keep or to dispense with their services or to provide mega-training. There are many limitations that make the management reluctant to introduce HRA. Some of the attributes are:

    1.There are no clear cut and specific procedures or guidelines for finding costs and value of human resources of an organization. The systems that are being adopted have certain drawbacks.
    2.The period of existence of human resources is uncertain and hence valuing them under uncertainty in the future seems to be unrealistic.
    3.The much needed empirical evidence is yet to be found to support the hypothesis that HRA as a tool of management facilitates better and effective management of human resources.
    4.Since human resources are incapable of being owned, retained, and utilized, unlike physical assets, this poses a problem to treat them as assets in the strict sense.
    5.There is a constant fear of opposition from the trade unions as placing a value on employees would make them claim rewards and compensations based on such valuations.
    6.In spite of all its significance and necessity, tax laws don't recognize human beings as assets.
    7.There is no universally accepted method of the valuation of human resources.

Source: Wikipedia