Some of the approaches used to analyse and control costs of human resources are given below:
Approaches
1. Ratio Analysis:
In this approach some key performance indicators concerning the HR function are used. These indicators called personnel ratios may relate to the following areas:
(a) Cost per recruitment
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(b) Recruitment cycle time
(c) Cost per trainee.
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(a) Cost per Recruitment:
Cost of recruitment consists of:
1. Cost of time spent by personnel in the recruitment process.
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2. Cost of advertisement.
3. Fees paid to recruitment agency.
4. Costs of conducting tests and interviews.
5. Costs of medical examination and
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6. Costs pertaining to administration.
(b) Recruitment Cycle Time:
Is the time taken from the beginning to the end of recruitment process? Analysis of the time taken in the recruitment process will help to determine the lead time required to initiate and complete the process of recruitment. It will also help to reduce the recruitment cycle time.
(c) Turnover Rate:
Replacement costs include all costs of recruiting an employee. In addition, interruption in work performance, orientation and training of new employ as are additional costs.
(d) Cost per Trainee:
It is difficult to evaluate training. Wasteful training costs should be reduced but cost reduction in training should not be at the expense of quality of training.
2. HR Productivity:
It is essential to monitor and improve the productivity of human resources. Human resources have a tremendous potential to improve productivity.
Many organisations have considerably cut down idle time, over time and idle capacity through better utilisation of human resources.
Productivity bargaining, technology upgradation, quality circles are some of the techniques through which HR productivity could be increased.
3. Employee Relations Index:
This is a quantitative technique of measuring the overall effectiveness of the total personnel programme.
This composite index consists of several strategic items such as absenteeism, separations, occupational health, suggestions, formal grievances, work stoppages etc. Weights are assigned to each item according to its relative importance.
4. HR Reports and Budgets:
A HR budget is a personnel programme expressed in monetary terms for specified period of time. It covers HR costs like compensation, employee facilities, training and development etc.
Comparison of actual costs with budgeted figures will help to decide corrective actions. Reports provide useful information for controlling human resource costs.