Essentials of Human
Resource Management
COURSE INTRODUCTION
Human resource can be defined as people who are employed in an organisation and are
responsible for carrying out operations.
Human Resource Management (HRM) is a comprehensive process of acquiring, developing,
motivating, and maintaining a pool of efficient employees. The main aim of HRM is to ensure
the right people with the right skills for the right job position in an organisation.
The key functions of HRM include recruiting people, training them, appraising their
performance, motivating them, ensuring their health and safety, managing workplace
communication, and so on.
Effective HRM encourages employees to work efficiently towards accomplishment of
organisational goals and objectives.
Chapter 12: HR Audit
and Accounting
Chapter Index
S. No Reference No Particulars Slide
From-To
1 Learning Objectives 5
2 Topic 1 HR Audit 6-9
3 Topic 2 HR Accounting 10-12
4 Topic 3 HR Information Systems 13-16
5 Let’s Sum Up 17
LEARNING OBJECTIVES
Explain the concept of HR audit
Discuss the process of HR audit
Explain the concept of HR accounting
Discuss the methods of HR accounting
Explain the concept of HRIS
List the components of HRIS
HR AUDIT
The term audit can be defined as an unbiased examination and verification of an
organisation’s financial statements, employee records, etc. to determine their
accuracy and outline any issues that need to be addressed.
HR audit is a systematic process of examining the policies, procedures, practices,
structure, strategies, employee documents, etc. with respect to an organisation’s
HRM function.
It aims to evaluate the strengths, weaknesses, and developmental needs of employees
with a view to enhance organisational performance.
HR audit plays a crucial role in an organisation as it helps managers to take
decisions on current HR problems so that overall productivity is not affected.
HR AUDIT
NEED FOR HR AUDIT
HR audit is performed to determine whether HR objectives are aligned with
organisational objectives and employees are committed towards achieving the
organisational goals and objectives.
HR audit is needed to determine whether employees follow organisational standards,
maintain discipline, and work as per the organisation’s policies.
HR audit is needed to review the effectiveness of various HR programs, such as
selection and recruitment, training and development, and performance appraisal,
and improve them.
HR audit helps to determine whether the HRM function is in compliance with the
national and state HR laws.
HR audit aims to check all possible documentation with regards to performance
appraisal reports, data related to the functions of the HR department, manager
feedback reports on employees’ performance, etc.
HR AUDIT
PROCESS OF HR AUDIT
Determining the objectives of the HR
Audit
Gathering the background data
Formulating the audit plan
Developing the audit report
Acting based on the report
HR AUDIT
LIMITATIONS OF HR AUDIT
HR audit can lack uniformity as auditors tend to follow different auditing standards
and guidelines. This is because there is no set standard or principles for HR audit.
Sometimes HR personnel fail to provide relevant information, which leads to
inaccurate and ineffective audit process.
HR audit can turn to subjective in nature when there is a lack of statistical data.
HR auditors may lack the required skills and knowledge, which may lead to a failure
of the audit process.
HR auditors sometimes fail to recognise valuable inputs from senior HR personnel
which might be useful for the audit process.
HR ACCOUNTING
Human Resource Accounting (HRA) is defined as a system of identifying, collecting
and reporting data on investments in human assets.
In other words, HRA is a future approach that reflects the potential of human
resource in monetary terms.
HRA acts as an important tool to human asset control and provides information to an
organisation whether the asset is appreciated, depleted, or conserved.
HR ACCOUNTING
METHODS OF HRA
Methods of HRA
Cost-based method Value-based method
HR ACCOUNTING
LIMITATIONS OF HRA
HRA doesn’t have any set accounting standards for measuring human resource value.
Thus, organisations follow their own HRA standards to measure the values of human
assets. This difference in approaches in organisations leads to non-comparison of
values of human assets.
The human asset valuation is dependent on the assumption that employees stay in
organisations for a certain period of time. However, over the years, human resource
mobility has increased; thus, this assumption might not work in some organisations.
Organisations may lose valuable human resource if the valuation is incorrectly
carried out. This situation can also arise if the results of the valuation of human
resource are not utilised effectively.
There are no specific guidelines to determine the cost and value of an organisation’s
human resources as the current methods of HRA have their own limitations.
HR INFORMATION SYSTEMS
Human Resource Information System (HRIS) is a system designed to provide
necessary information for effective management of human resource.
In other words, HRIS is an online database system that helps in managing
information related to all employees of an organisation at one place. This information
can be related to employees’ salary structure, appraisal, and leaves, and so on.
HRIS collects, stores, processes, generates, and disseminates human resource
information for effective business decision making.
It provides information on various HR policies formulated by the organisation to HR
personnel as well as employees.
HR INFORMATION SYSTEMS
COMPONENTS OF HRIS
Input
• This component enters employee data into HRIS. The processes and procedures
needed for data collection are initially established. Once the data is collected, it is
entered into the system in a coded form.
Data maintenance
• This component of HRIS updates the data which is stored in the storage device.
Output
• HR managers tend to be more interested output of HRIS as essential information
and reports of human resources are generated. This helps managers to evaluate,
perform calculations, plan and forecast future human resource needs and
development in the organisation.
HR INFORMATION SYSTEMS
TYPES OF HRIS
Types of HRIS
Operational HRIS Tactical HRIS Strategic HRIS
HR INFORMATION SYSTEMS
LIMITATIONS OF HRIS
Costs associated with HRIS implementation
•Transaction costs associated with acquiring the latest equipment and technology for HRIS
may be too high, especially for small and medium-sized organisations.
Resistance to change
•Employees might feel comfortable in the old paper system of recording HR data. They
might find it difficult to adapt to this change.
Security
•Highly confidential employee information can be misused due to the negligence of the
concerned system operator or the failure to monitor and maintain the system.
Data entry errors
•Human errors commonly occur while entering data into the system. If data is wrongly
entered, updated or changed, this might lead to a loss of data and the organisation can face
high costs to rectify the system along with legal complications.
LET’S SUM UP
HR audit is a systematic process of examining the policies, procedures, practices,
structure, strategies, employee documents, etc. with respect to an organisation’s
HRM function.
Human Resource Accounting (HRA) is defined as a system of identifying, collecting
and reporting data on investments in human assets.
HRA acts as an important tool to human asset control and provides information to an
organisation whether the asset is appreciated, depleted, or conserved.
Human Resource Information System (HRIS) is a system designed to provide
necessary information for effective management of human resource.
