Chapter 12human Resources Decisions1 2012 John Wiley Sons Ltd Acc ✓ Solved

Chapter 12 Human Resources Decisions 1 © 2012 John Wiley & Sons, Ltd, Accounting for Managers, 4th edition, 978XXXXXXXXXX, Chapter X Overview Human resources and accounting The cost of labour Relevant cost of labour 2 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Human resources and accounting It is through human resources that the production of goods and services takes place Human resource management is concerned with the management of people in a way that improves organizational performance and effectiveness Armstrong & Taylor (2014) Job design, recruitment, training, motivation, performance appraisal, industrial relations, employee participation, team work, redundancy, health & safety, employee policies & practices, culture.

3 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Human resources & accounting In accounting terms, people are treated as labour: a resource that is consumed – therefore an expense rather than an asset - either directly in producing goods or services, or indirectly as a business overhead Businesses value human resources but do not value them for accounting purposes 4 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Cost of labour Cost per unit of production Salary + oncost = total employment cost Divided by productive time = labour cost per hour Divided by production = labour cost per unit of production A longer term view may include recruitment and training costs, etc.

Labour is traditionally a variable cost but in the short term may be a fixed cost 5 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Cost of labour 6 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Illustration: cost of labour Total employment cost per working day = £76,000/227 = £334.80 per day If employee works 8 hours and is 80% productive the cost per hour worked is £52.31 (£334.80/(8x80%)) 7 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Relevant cost of labour Full capacity: the relevant cost could be the additional labour costs (e.g. casual labour or overtime) which may have to be incurred, or the opportunity cost following from the inability to sell product/ services or the cost of diverting labour from alternative work Spare capacity: if there is surplus labour which will be paid whether a particular decision is taken or not, the labour cost is irrelevant to the decision 8 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Relevant cost of labour 9 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Illustration: Outsourcing 10 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Redundancy and its alternatives One of the first business responses to a downturn in profits is to make staff redundant.

Although the redundancy payments will be recognised as a business cost, there is a substantial social cost, not reflected in the financial reports of a business. These social costs will be borne by the redundant employee, while the financial burden of unemployment benefits may be borne by the taxpayer. This short-term concern with reducing labour cost often ignores the long term investment in skills and the potential for cost improvement that can arise from a better understanding of business processes 11 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, Key points Labour costs and their accounting treatment Cost of labour Cost per hour, cost per unit of production Relevant costs Full or spare capacity Labour as a long term investment; costs borne by the organization or society 12 ©2015 John Wiley & Sons Ltd, Accounting for Managers, 5th edition, W W o o r r k k i i n n g g d d a a y y s s x x L L e e s s s s : : A A n n n n u u a a l l l l e e a a v v e e S S i i c c k k l l e e a a v v e e 5 5 P P u u b b l l i i c c H H o o l l i i d d a a y y s s A A c c t t u u a a l l d d a a y y s s a a t t w w o o r r k k S S a a l l a a r r y y , , O O n n c c o o s s t t s s : : N N a a t t i i o o n n a a l l i i n n s s u u r r a a n n c c e e % % 6 6 , , P P e e n n s s i i o o n n c c o o n n t t r r i i b b u u t t i i o o n n 6 6 % % 3 3 , , , , , , B B o o n n u u s s p p a a i i d d a a s s s s h h a a r r e e o o p p t t i i o o n n s s 5 5 , , T T o o t t a a l l s s a a l l a a r r y y c c o o s s t t , , N N o o n n - - s s a a l l a a r r y y b b e e n n e e f f i i t t s s : : C C o o s s t t o o f f m m o o t t o o r r v v e e h h i i c c l l e e , , E E x x p p e e n n s s e e a a l l l l o o w w a a n n c c e e 2 2 , , , , T T o o t t a a l l e e m m p p l l o o y y m m e e n n t t c c o o s s t t , , Working days 52 x 5 260 Less: Annual leave 20 Sick leave 5 Public Holidays Actual days at work 227 Salary 50,000 Oncosts: National insurance 12% 6,000 Pension contribution 6% 3,,,000 Bonus paid as share options 5,000 Total salary cost 64,000 Non-salary benefits: Cost of motor vehicle 10,000 Expense allowance 2,000 12,000 Total employment cost 76,000 T T h h e e f f i i x x e e d d / / v v a a r r i i a a b b l l e e c c o o s s t t a a p p p p r r o o a a c c h h w w o o u u l l d d h h a a v v e e i i d d e e n n t t i i f f i i e e d d t t h h e e c c o o s s t t o o f f l l a a b b o o u u r r a a s s H H o o u u r r s s H H o o u u r r l l y y l l a a b b o o u u r r c c o o s s t t T T o o t t a a l l l l a a b b o o u u r r c c o o s s t t P P a a r r t t n n e e r r s s € € € € 7 7 , , M M a a n n a a g g e e r r s s € € € € , , S S u u p p p p o o r r t t S S t t a a f f f f € € € € 3 3 , , V V a a r r i i a a b b l l e e c c o o s s t t o o f f l l a a b b o o u u r r € € , , P P a a r r t t n n e e r r s s h h o o u u r r s s – – i i r r r r e e l l e e v v a a n n t t a a s s u u n n a a v v o o i i d d a a b b l l e e s s u u r r p p l l u u s s l l a a b b o o u u r r N N i i l l M M a a n n a a g g e e r r s s h h o o u u r r s s @ @ € € – – t t h h i i s s i i s s t t h h e e o o p p p p o o r r t t u u n n i i t t y y c c o o s s t t o o f f t t h h e e l l o o s s t t r r e e v v e e n n u u e e f f r r o o m m c c l l i i e e n n t t s s w w h h o o a a r r e e t t u u r r n n e e d d a a w w a a y y € € , , S S u u p p p p o o r r t t S S t t a a f f f f h h o o u u r r s s @ @ € € c c o o s s t t 3 3 , , R R e e l l e e v v a a n n t t c c o o s s t t o o f f l l a a b b o o u u r r € € , , The fixed/variable cost approach would have identified the cost of labour as Hours Hourly labour cost Total labour cost Partners 120 €60 € 7,200 Managers 350 €45 €15,750 Support Staff 150 €20 € 3,000 Variable cost of labour €25,950 Partners 120 hours – irrelevant as unavoidable surplus labour Nil Managers 350 hours @ €100 – this is the opportunity cost of the lost revenue from clients who are turned away €35,000 Support Staff 150 hours @ €20 cost 3,000 Relevant cost of labour €38,000 ( Deconstruction of Literature Matrix ) Source 1 Source 2 Source 3 APA Reference Purpose & Significance (Theme) Research Question(s): Design and Population: Study Design Subjects Methodology: Instrumentation Procedures Statistical Analysis Limitations & Assumptions Results: Key Findings: Hypothesis Supported Conclusions: Are the conclusions valid based on the data and analysis?

Topics for Further Research © 2011. Grand Canyon University. All Rights Reserved. APA Reference LaMontagne, L. (2015). MarketingSherpa consumer purchase preference survey: Demographics of customer reasons to follow brands’ social accounts .

Retrieved from Kirà¡Ä¾ovà¡ . A. & PavlàÄeka , A. (2014). Development of Social Media strategies in tourism destination. Procedia- Social and Behavioral Sciences, 175 . 358–366. doi.10.1016/j.sbspro.2015.01.1211 Sharda, H. & Motwan i, B. (2015).

Discriminant model for online viral marketing influencing consumers behavioural intention. Pacific Science Review B: Humanities and Social Sciences , 1 (1). 49–56. doi:10.1016/j.psrb.2015.12.002 Erdogmus, I. E. & Cicek, M. (2012). The impact of social media marketing on brand loyalty.

Procedia- Social and Behavioral Sciences , 58. . doi:10.1016/j.sbspro.2012.09.1119 Tong, B. & Tung-lung, C. S. (2014). Finding disseminators via electronic word of mouth message for effective marketing communications. Decision Support Systems , 67 . 21–29. doi:10.1016/j.dss.2014.07.006 Purpose & Significance (Theme) Researchers provided gradations to establish population characteristics of following social accounts of brands.

The epistemology aimed to establish how tourist destination collaborates with tourists or customers online via social networks, and the effect it has on product sales. Didactic research succinct how individuals leverage viral marketing, whereby messages are sent to millions of people on social profiles within a short period of time. Researchers presented an examination aimed at identifying the effects social media marketing has imposed on brand loyalty. The research established whether online customer reviews on friends social networks lead to growth in sales. Research Question(s): For which of the following reasons, if any, do you follow, like, and/or connect with a brand's social media account(s)?

The participants were asked to send profiles for a virtual tour of Cape Town’s least explored areas, amongst other questions Multiple questions on questionnaires. Questions presented tested loyalty, and why consumers stick to brands on social media, and different categories. As a consumer, do you like to talk to your friends about certain products? Methodology: Online Survey Theoretical background study of social media sites and practical observations Questionnaires Administration of structured questionnaires Survey Questionnaire Source 6 Source 7 Source 8 Source 9 Source 10 APA Reference Hajli, N. M. (2014).

A study of the impact of social media on consumers. International Journal of Market Research, 56 (3). . doi:10.2501/UMR- Hudson, S., Roth, M. S., Madden, T. J., & Hudson, R. (2014). The effects of social media on emotions, brand relationship quality, and word of mouth: An empirical study of music festival attendees.

Tourism Management, 47 . 68-76. doi:10.1016/j.tourman.2014.0911 Laroche, M., Habibi, M. R., & Richard, M. O. (2013). To be or not to be in social media: How brand loyalty is affected by social media?

International Journal of Information Management , 33(1 ). 76–82. doi:10.1016/j.ijinfomgt.2012.07.003 M. Onur Gulbahar, M. O. &. Fazli, Y. (2015).

Marketing efforts related to Social Media channels and mobile application usage in tourism: Case study in Istanbul. Procedia - Social and Behavioral Sciences , 195 (3). . doi:10.1016/j.sbspro.2015.06.489 Nicholls, J. (2012). Everyday, everywhere: Alcohol marketing and Social Media—Current trends. School of Humanities and Cultural Industries, 47 (4). . doi: 10.1093/alcalc/ags043 Purpose & Significance (Theme) The study produced analytical details explaining how consumers of various brands interconnect using the Internet, and Social media. Researchers focused on the effects of Social media on relationships of customers on product brands.

The research aimed to understand the effects of Social media, and customer loyalty regarding product brands. The author’s research exemplified the efforts performed by hotel management in Istanbul to market hotel services on Social media channels, and mobile applications. Nicholls research illustrates the effects of Social media, and marketing of alcohol brands in the United Kingdom. Research Question(s): Do social media in social networking sites affect the user’s trust? Do PU and trust affect the user’s intention to buy?

Which factors (PU or trust?) are more important in determining the user’s intention to buy? To what extent does social media interaction affect consumers' emotional attachment with festival brands? Do stronger brand relationships, cultivated through social media interaction, enhance the willingness to recommend the brand? The research provided an interesting questionnaire. Which social media channel is preferred for marketing efforts in Turkey or which channels are used by companies for CRM based efforts?

Which of our reds is your favorite? If you were a Blossom Hill wine, which would you be? Methodology: PLS-SEM Surveys were administered online Researchers sent questionnaires through several posts on websites, such as Facebook, MySpace, and Twitter along with distribution lists. In-depth questions; field survey The researchers used Standard screen capture technology to take snapshots of complete Twitter timelines, and Facebook walls with the brands. © 2011. Grand Canyon University.

All Rights Reserved. Deconstruction of Literature 1 Unsatisfactory 0.00% 2 Less than Satisfactory 74.00% 3 Satisfactory 79.00% 4 Good 87.00% 5 Excellent 100.00% 80.0 %Content 20.0 %Summarize Introduction Description of the purpose, intent, and scope of the study is either not complete or not clear. Description of the purpose, intent, and scope of the study is vague and/or insufficiently developed. The reader is able to glean the purpose, intent, and scope of the study with effort. The description of the purpose, intent, and scope of the study, is detailed.

The description of the purpose, intent, and scope of the study, is comprehensive and from current literature. 20.0 %Summarize Methodology Description of the research design, population sample, data collection, and other procedures used in the study is either not complete or not clear. Description of the research design, population sample, data collection, and other procedures used in the study is vague and/or insufficiently developed. The reader is able to glean the research design, population sample, data collection, and other procedures used in the study with effort. The description of the research design, population sample, data collection, and other procedures used in the study, is detailed.

The description of the research design, population sample, data collection, and other procedures used in the study, is comprehensive and from current literature. 20.0 %Summarize Results Description of the data collected and the findings of the study is either not complete or not clear. Description of the data collected and the findings of the study is vague and/or insufficiently developed. The reader is able to glean data collected and the findings of the study with effort. The description data collected and the findings of the study, is detailed.

The description of the data collected and the findings of the study, is comprehensive and from current literature. 20.0 %Summarize Conclusion Critique of the presentation of the study and a summary assessment of the study are either not complete or not clear. Critique of the presentation of the study and a summary assessment of the study are vague and/or insufficiently developed. The reader is able to glean the critique of the study and the summary assessment of the study with effort. The critique of the study and the summary assessment of the study are detailed.

The critique of the study and the summary assessment of the study are comprehensive and from current literature. 20.0 %Organization and Effectiveness 20.0 %Mechanics of Writing Mechanical errors are pervasive enough that they impede communication of meaning. Inappropriate word choice and/or sentence construction are used. Frequent and repetitive mechanical errors distract the reader. Inconsistencies in language choice (register), sentence structure, and/or word choice are present.

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Human Resources Decisions: An Overview and Analysis

Human Resources (HR) decisions are pivotal in shaping organizational performance in a competitive business environment. Among various resources driving operational effectiveness, human capital is often the most critical. This paper explores the intricate relationship between human resources and accounting, particularly focusing on labor costs and their impact on decision-making within an organization.

Human Resources and Accounting

Human Resource Management (HRM) is recognized as essential for managing people in organizations to enhance their effectiveness and performance (Armstrong & Taylor, 2014). While HRM encompasses a broad range of functions, such as job design, recruitment, training, motivation, and industrial relations, accounting tends to simplify this complex aspect. In accounting terms, employees are considered labor; they are treated as a cost rather than an asset, reflecting a significant oversight in recognizing the value of human capital (Baker & Baker, 2017).
The traditional accounting practices classify labor costs merely as expenses incurred in producing goods or services. This perspective can hinder organizations from appreciating the long-term benefits of investing in their workforce, including developing skills and fostering employee loyalty (Becker & Huselid, 1998). Effective HRM strategies that consider labor as a critical investment—rather than a mere cost—can substantively improve organizational profitability over time.

Cost of Labor

Understanding the cost of labor is essential in managing expenses and making informed HR decisions. The cost of labor can be intricately calculated using the formula:
Total Employment Cost = Salary + Oncosts,
where oncosts refer to additional expenses such as benefits and overheads associated with employment (Horngren et al., 2013). For instance, the total employment cost for a specific employee or a group can be expressed in terms of cost per productive hour or per unit produced. Productivity metrics highlighted in various studies indicate that the productivity of staff can justify higher labor costs if it leads to increased outputs and profitability (Griffin & Moorhead, 2014).

Relevant Cost of Labor

The concept of relevant cost comes into play during decision-making processes, particularly when considering labor options in scenarios such as hiring additional staff versus outsourcing. When assessing relevant labor costs, organizations must discern between full capacity and spare capacity scenarios. For full capacity, additional labor costs, such as overtime or hiring temporary staff, may be evaluated against the opportunity cost of lost sales from unfulfilled orders (Brealey & Myers, 2016). Conversely, in times of spare capacity, existing labor costs may be deemed irrelevant in decision-making since these costs will remain unchanged regardless of the decision made (Thompson et al., 2015).
A crucial illustration of this lies in outsourcing decisions where businesses weigh the costs of existing in-house labor against the promises of lower operational expenses by outsourcing tasks. If outsourcing does not yield significant labor cost reductions compared to maintaining a skilled workforce, organizations may miss out on the long-term benefits of investing in employee retention and development (Cascio, 2016).

Redundancy and Its Alternatives

One immediate strategy for organizations facing profit downturns is redundancy, often viewed as a cost-effective response to financial strains. However, redundancy carries not only financial costs—reflected in the company's financial reports—but also substantial social costs. Employees who are made redundant face social and economic challenges that can affect their mental health and future employability. Moreover, the implications of redundancy extend to the community and taxpayer, who may bear the burden of unemployment (Bartlett et al., 2017).
Organizations must balance short-term cost-cutting measures with the longer-term consequences of those decisions. Investing in employee training, fostering workplace culture, and recognizing the effort of employees can drive performance improvements and minimize turnover costs (Boxall & Purcell, 2016). Human capital invested in through training not only enhances productivity but can also lead to innovations that drive the business forward.

Long-term Investments vs. Short-term Cuts

A common pitfall in labor cost management is the short-term focus, which seeks immediate reductions without regard to long-term impacts. By treating labor as a long-term investment, companies can leverage the skills and innovations of their employees (Collins & Clark, 2003). Organizations that prioritize employee involvement in decision-making processes and encourage participation create a stronger workforce committed to collective goals, often resulting in greater organizational success.
The opportunity cost of not investing in talent can be significant; organizations that neglect to foster a skilled workforce risk falling behind competitors who invest in their human capital (Kaplan & Norton, 2004). Ultimately, the clear understanding of labor costs—through both accounting and HR lenses—becomes crucial in strategic management decisions that shape an organization’s future.

Conclusion

Managing human resources effectively requires an understanding that transcends the simplistic view of labor as merely an expense. Integrating human resource decisions with accounting principles allows organizations to lead with a strategic advantage in workforce management. By prioritizing investments in skills development and employee engagement, organizations can achieve a balance between managing costs and fostering a robust human capital framework that ultimately drives success.
Through effective HR management strategies that consider the long-term implications of labor costs and the relevant cost theory, companies can navigate economic uncertainties while simultaneously cultivating their most significant asset—their employees.
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References

1. Armstrong, M., & Taylor, S. (2014). Armstrong's Handbook of Human Resource Management Practice. Kogan Page Publishers.
2. Baker, G. P., & Baker, N. J. (2017). The Impact of Human Capital on the Performance of Firms. National Bureau of Economic Research.
3. Becker, B. E., & Huselid, M. A. (1998). Human Resource Practices and Firm Performance: An Empirical Assessment. Academy of Management Journal, 39(4), 909-934.
4. Boxall, P., & Purcell, J. (2016). Strategy and Human Resource Management. Macmillan International Higher Education.
5. Brealey, R. A., & Myers, S. C. (2016). Principles of Corporate Finance. McGraw-Hill Education.
6. Cascio, W. F. (2016). Managing Human Resources: Productivity, Quality of Work Life, Profits. Cengage Learning.
7. Collins, C. J., & Clark, K. D. (2003). Strategic Human Resource Practices, Top Management Team Social Networks, and Firm Performance: The Role of Human Resource Practices in Creating Expected Competitive Advantage. Academy of Management Journal, 46(6), 740-751.
8. Griffin, R. W., & Moorhead, G. (2014). Organizational Behavior. Cengage Learning.
9. Horngren, C. T., Sundem, G. L., & Stratton, W. O. (2013). Introduction to Management Accounting. Pearson Education.
10. Kaplan, R. S., & Norton, D. P. (2004). Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business Press.
This comprehensive examination highlights the fiscal and social complexities of human resource decisions within the context of organizational management, emphasizing the need for a strategic approach in integrating HR and accounting practices to enhance corporate resilience and effectiveness.