Model of HRA
Model of HRA
Model of HRA
economy. The skills provide economic value since a knowledgeable workforce can lead to
increased productivity. The concept of human capital is the realization that not everyone
has the same skill sets or knowledge.
Human capital is the economic value of the abilities and qualities of labor that influence
productivity. These qualities include higher education, technical or on-the-job training, health,
and values such as punctuality.
Human capital is important because some level of human knowledge and skills is
necessary in order for an organization to accomplish anything.
All employees are classified into specific groups according to their age,
experience, and skill.
The total earnings which each group will get up to retirement age are
calculated.
The total earnings calculated as above are discounted at the rate of the cost
of capital.
2. This method only considers wages and salary, but wages and salaries are not
only the costs associated with the employees. There are other costs that are
associated with the employees.
3. The Model ignores the possibility and probability that an individual may
leave an organization for a reason other than death or retirement. The
model’s expected value of human capital is actually a measure of expected
‘conditional value’ of a person’s human capital. The implicit condition is that
the person will remain in an organization until death or retirement. This
assumption is not practical.
Forecasting the period will remain in the organization, i.e., his expected
service life;
Identifying the services states, i.e., the roles that they might occupy
including, of course, the time at which he will leave the organization;
Under this model, the value of human resources is equivalent to the present
value of the net benefits derived by the enterprise from the service of its
employees. The following steps are involved in this approach:
The excess of the value of future human resources over the value of future
payments is ascertained. This represents the net benefit to the enterprise
because of human resources.
4. Likert Model
Rensis Likert in the 1960s was the first to research in HRA(Human Resource
Accounting) and emphasized the importance of strong pressures on HR’s
qualitative variables and on its benefits in the long-run.
Causal variables;
End-result variables.
The interaction between the causal and intervening variables affect the end-
result variables by way of job satisfaction, costs, productivity, and earnings.
5. Ogan’s Model
Pekin Ogan (1976) was the pioneer of the Net benefit model. This, as a matter
of fact, is an extension of “net benefit approach” as suggested by Morse.
According to this approach, the certainty with which the net benefits in future
will accrue should also be taken into account, while determining the value of
human resources. The approach requires the determination of the following:
The net benefits from all employees multiplied by their certainty factor will
give certainty-equivalent net benefits.