Human Resource Accounting - Limitations of Human Resource Accounting

Limitations of Human Resource 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 organisation as well as from organisation to organisation. 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 which make the management reluctant to introduce HRA. Some of the Attributes are:-

1. There is no proper clear cut and specific procedure or guidelines for finding costs and value of human resources of an organisation. The systems which are being adopted have certain drawbacks.
2. The period of existence of Human Resource is uncertain and hence valuing them under uncertainty in 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. As human resources are incapable of being owned, retained, and utilised, unlike the physical assets, there is a problem for the management 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, the Tax Laws don’t recognise human beings as assets.
7. There is no universally accepted method of the valuation of Human Resources.