Explanation:

Measuring Human Resource costs (HR costs, also called Human Resource costing), is a key component of HR accounting. In this article, we’ll explain what Human Resource costing is, why you should measure costs, how to do it and why just measuring Human Resource costs is not enough.

Traditionally, the human resource department has been regarded as a cost center, or fee burner. For this reason, there’s always a lot of emphasis on cost reduction within HR. This is where Human Resource costing comes in. The first question is how we define cost. According to Flamholtz (1999), cost is a sacrifice incurred to obtain some anticipated benefit or service. This means that all cost has an “expense” and an “asset” component. This is what Human Resources accounting is all about: measuring the expenses and asset components of cost.

There are multiple ways to do this, but let’s first understand why we measure Human Resource costs.