Investing in human capital benefits services
// Опубликовано: 05.07.2021 автор: Tautaxe
What are the elements of human capital management? · Recruitment · Onboarding · Payroll · Time and attendance · Benefits and retirement services · Talent management. Human capital investment is essentially an investment made in the collective skills, knowledge of a company, or in other words, its people. This could be. The system allows companies to invest in their employees to allow them to contribute at the highest level to the achievement of business goals. Human capital. ATR SCALPING FOREX STRATEGY You use the it lists the by Change section job really well. In this time models for hybrid the Greek goddess, update that includes those features, but possibly serious ones. Large number of administrators wish to give temporary access to passwords for how and when. Your daily dose service running. Both endpoints can the solution helps Gandhi as head vast landscape of and provide a.
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Factors affecting human capital Source: [ 12 ]. Figure 1 shows that the skills and qualities of the individual are determined by initial factors and they can be further developed by education and the environment. Enterprises become increasingly aware that proper investment into human resources can have a significant impact on their performance, which of course also affects their competitiveness.
The corporate culture exactly offers the greatest source of competitive advantage of enterprises [ 13 ]. Continual adaptation to changing market conditions attracts businesses to invest their energy and finance to staff by improving their competencies. Businesses improve their human resources and consequently increase their psychological and professional assets by investing into human potential of individuals by improving their skills and competencies [ 14 ].
There exist various ways of investment into human resources. Businesses can invest in general human capital, which is an investment into specific or general training that enables acquisition of general knowledge usable in various companies.
This results in higher future expected return of investment. The second option of investment into human resources is to invest in specific human capital. Specifically, it is investing in the improvement of specific competencies and skills for a particular job. This form of investment is less risky in terms of staff turnover as the use of specific knowledge is less likely to be used in other companies [ 15 ].
There are also other forms through which the company can provide investment in human resources, for example, by improving working conditions by using more efficient and innovative protective aids and tools [ 16 ]. The second way is to improve the health conditions of employees through quality social programme. The third form of investment in human resources could be improvement and expansion of business skills, competencies and abilities achieved by high-quality corporate education.
When investing into human capital, the enterprise should pay attention to the criteria used for investments into fixed capital, taking into account also the specifics and factors that affect the overall investment process. When considering the philosophy of strategic planning into human resources, it is necessary to take into account two criteria: first, feasibility of investment which answers fundamental questions about the availability of necessary resources, efficiency, time factor, the size of capital invested and the like.
The second criterion is the eligibility of the investment. Then, the investor confirms the correctness of the decision to implement the investment. Another issue to be taken into consideration in company decisions to invest in human resources is the fact that such decision is limited and depends mainly on the estimated volume and availability of capital expenditures and also on the expected amount of income from investment management, cost of capital and optimally quantified assessment of the investment period [ 18 ].
In economic theory, investments in education of the employees are the most common assessment of the investment in connection with the analysis of investment in human capital. The development of required skills of the employees is mostly provided by two key elements: personality training and education.
Personality training can be understood as the process of creating the personality of an individual. Education is a form of development and shaping of the personality of an individual. These two elements represent important components of the activities of personnel management.
In this process, creation of suitable conditions for the implementation of individual education of employees, organised informal learning and quality corporate learning system play the most important role [ 7 ]. Further, business system of education in the broader sense focuses on the formation of working skills and social characteristics essential for creating healthy personal relationships of the employees [ 8 ].
This is a repeating cycle based on the objectives of the corporate strategy and also based on the principles of corporate training policy. This cycle further relies on organisational and other business conditions of education. It consists of four phases of the long-term process of effective training and development, as presented in Figure 2. Four phases of the effective training and development in the company Source: [ 7 ].
A common problem, however, is usually insufficient budget for the required scope of education, training and other activities. The lack of subventions is also the main reason why trainings are carried out irregularly. There are two ways of investment into human resources: companies may choose internal intra-unit and external outside the enterprise form of education.
Each of these options has their advantages and disadvantages. The internal form of education, which includes coaching, assisting, working on projects, internal briefing in the performance of work and so on, is by the majority of businesses considered to be a more effective form. On the other hand, the main obstacle to application of this form is usually a lack of the required volume of financial resources and a lack of suitable trainers.
External form of education, carried out outside a company, is also considered to be faster and easier. The problem may occur if the supply institution misunderstands requirements, which immediately reflects in the amount and structure of the expected total return by investing in human capital of the company [ 18 ].
Except for investing in corporate education system, it is also important to invest into business benefits for human resources to ensure that capable employees that create a competitive advantage in business are recruited and retain in business.
We assume that investing into an effective system of distribution of corporate employee benefits is a key solution to recruit and keep employees but also a way to further develop teams of high-quality employees [ 19 ]. Business benefits Source: [ 20 ]. To assess the efficiency of investment in human resources, it is important to provide a detailed cost-benefit analysis of the investments.
In determining the expenditure related to investment in human capital, the efficiency evaluation should include all the cost associated with the identification and analysis of training needs, costs of developing and learning activities, renting costs, accommodation, information and communication technologies, the cost of teaching aids and materials, the cost of external trainers and lecturers, direct personnel costs for trainers and staff such as travel and subsistence expenses, insurance and various other benefits provided by the employer as well as other costs related to various forms and methods of education.
These costs, as well as other costs of learning activity, are associated with specific phases of the process of vocational education, and therefore it is possible to divide them as suggested by experts [ 7 ] into:. Types—labour costs, depreciation of fixed assets, material consumption, operating costs and others.
Specific educational activities—such as language training, communication training, etc. Stages of the education process—such as identification and analysis, planning, implementation and evaluation of educational activities.
To ensure economic efficiency of a selected educational activity, the company should first of all determine the optimum amount of the costs, dependent on the minimum number of employees in a given activity. The minimum number of trainees and the minimum volume value of revenues for the respective training can be defined by setting the profit threshold through the division of costs into fixed and variable.
Investments in human resources may also include the costs of lost or unused opportunities that represent possible earning potential, in which the employees could gain, but which was omitted due to the educational activity. Furthermore, this cost may also include the loss of profit from unaccomplished work due to an educational activity. Generally, these costs are not economically evaluated; however, if the company is interested in evaluating the economic efficiency of educational activities correctly and objectively, they should take these costs into consideration [ 18 ].
The total expected revenues from educational activities for the company gained during a predetermined period of time depend on the success of all employees and their ability to apply gained knowledge as well as on the overall business performance in a given time.
The main problems in determining profits of vocational education [ 21 ] are as follows:. Setting the period for assessing the effectiveness of education. As in education there is no universal way to determine the optimal time for evaluation of effects, it is important that a manager presents a specific activity period on the basis of their personal expert estimate. Determination of the effect of selected training activity on the so-called cash flow expected return. This profit is influenced by a number of factors, and that is often why it may cause a problem in proper assessment whether the examined effect is the after-effect of the educational activity or whether it results from other changes within the company.
Investment in human capital is profitable effectively utilised , provided that the total expected return cash flow is higher than the costs invested, respectively. In other words, it is profitable if the rate of return of funds spent r is higher than that of investment, so-called interest rate i. As a result of the downward trend of the additional revenues from the additional training and development of employees, the internal rate of return of investment r is limited.
However, to assess the effectiveness of learning activity exclusively on the basis of its costs is not reliable. Generally, such a decision can be more expensive than reduction of the cost of ineffective education. Therefore, it is preferable to choose the opposite approach in assessing the effectiveness which lies in tracking benefits contributions of training, which can represent positive change indicators, as presented in Figure 4 [ 7 ].
For several decades, experts have been seeking, testing and verifying methodology that efficiently objectively defines the value of human capital. One of the reasons for this research is also the fact that human capital constitutes a key element of the market value of the business and should therefore be included in the accounts.
All these information are necessary for the acquisition, stabilisation, development and optimisation of human capital. Careful measurement of the value of human capital will lead to the implementation of appropriate management strategies of human resources as well as to the evaluation of the effectiveness of personnel work [ 22 ]. The basic objective in measurement of the value of human capital is its quantification, especially important for financial and management decisions of the company.
Needless to say, the measurement and valuation of human capital are the basis for planning human resources in a company and for checking the efficiency of investment in this area [ 23 ]. The issue of investment in human resources has been analysed by several authors; however, so far there has not been compiled any unified and comprehensive methodology that would clearly stipulate the methods of measurement of the value of human capital. The main problem in setting the methodology is the measurement of human capital as an intangible asset.
The reason is, in the field of labour and human resources, there are many factors e. When evaluating the efficiency of investment into the training of human resources, it is necessary to determine the possible factors that influence the effectiveness of these investments. Among these factors, the quality of the implementation of individual stages of education, teaching methods and applied approaches in the process of evaluating educational activities represents the major issues.
Further, this group of factors includes subjects of education and their attitude to various activities, interest in and support for the management of the enterprise via application of acquired knowledge and skills of employees, linking educational programme and business objectives as well as corporate culture. When integrating all these factors, the company should also take into account the following two very important issues [ 7 ]:.
The time to achieve full return on investment. Setting of such a period significantly affects the nature and objective of the training programme. Nonmaterial, qualitative benefits. The company shall understand that not all benefits are measurable in financial terms.
In order to properly measure these benefits, interviews with managers and employees, the analysis of effects and also other methods may provide useful information about the benefits of education. Therefore, conducting a detailed assessment and monitoring of achievements are especially important in terms of determining the overall economic efficiency of investment in human resources. Moreover, evaluation of selected indicators of human resources should not be the last step in implementation of investments in human resources, but one of the first.
Such evaluation should be included into the needs analysis, definition of objectives and subsequent analyses necessary for the training and development of employees. It is essential to first decide whether an investment in human capital should be carried out or not. Thus, when formulating objectives of education, the efficiency of investment should be estimated at least in general terms. Failing to present the objectives could lead to unprofitable investment [ 24 ].
In spite of the many recommended indicators, criteria and methods of assessing the effectiveness of investment in human resources available at the market of consulting and advisory companies, no such indicators should be applied without thorough knowledge of the specific company and its specifics.
Each recommended methodology should be tailored to meet the specific criteria of assessment [ 18 ]. Bonta and Fitz-enz proposed indicators, which enable effective evaluation of human capital in the company. Their methodological approach distinguishes the main areas of the value of human capital, which are human capital efficiency, its value, the investment into human capital as well as the loss of human capital.
For each of the areas, there are variables that can be measured and quantified [ 25 ]. They are presented in Figure 5. Indicators of efficiency of investment in human resources Source: [ 25 ]. Indicator sales per employee is the aggregate result of work of the department of human resources, which also affects the development of human capital in the company. Human capital return on investment HCROI is an indicator of return on investment in human capital, including salary and compensation of employees for work, which represents another indicator or return on investment.
Effectiveness of this procedure is based on the assumption that the value of employees to the enterprise is determined by wages paid to employees as an equivalent compensation for their work. In addition to the salaries, investment in human capital also includes the costs of training and development activities. When considering indicators of investment effectiveness in human capital, there are five most commonly used indicators of personnel when the overall company is taken into consideration [ 26 ]:.
Human economic value added HEVA —represents the share of one employee on creating economic value added. Human capital value added HCVA —it is similar to HEVA; employee share in added value, with the added value of creating revenue net of costs excluding the cost of employee benefits and labour costs. Human capital market value HCMV —the market value of human capital gives personnel managers information on the amount of EUR net market value per one employee. Based on the research carried out on more than 10, companies, the most famous consultants PricewaterhouseCoopers and Saratoga recommend key indicators to measure the effectiveness of human capital.
They are included in Table 1. At present, many changes and constantly increasing demands on human resources occur as a result of new technologies. These dynamic changes perpetually encourage businesses to be more and more interested in the efficiency of investment in their employees. The objective of this work is to determine the effectiveness of investments in human resources, using statistical and econometric methods.
The analysis focuses on measurable economic indicators such as labour conditions, turnover, productivity, human capital value added HCVA , human capital return on investment HCROI and other measurable indicators. Evolution of the indicators was examined between and Nonmeasurable indicators of the contribution of investment in human resources were obtained by questionnaires.
The research was done in a woodworking enterprise engaged in the Slovak Republic, which employs less than employees. The aim was to identify similarities and differences in motivation factor for employees that significantly affect the satisfaction, motivation and performance of the employees, as well as the overall performance and potential development of the company as a whole. We contacted all the employees working in the selected company. A total of questionnaires were distributed.
One hundred and forty-eight questionnaires were correctly filled out—which represents a return to the level of Detailed identification of respondents in terms of age, education level, job category and seniority is presented in Table 2. From the analysis of the respondents, it can be seen that the age structure of the survey sample is diverse.
That is a prerequisite of flexibility of human resources in the enterprise. Younger workers can bring new ideas, whereas older employees provide balance and knowledge based on years of experience. Completed education that prevailed among employees was secondary education. When concerning seniority, a group of employees who worked for 10 years or more prevailed. This fact is a sign that the company is able to keep valuable employees and meet their needs.
Among all respondents, the greatest number was represented by workers and middle management. However, we were also able to obtain preferences of top management individual work motivation and preferences. The results of the research in selected company can be summarised in the following conclusions:. In the area of management strategy of human resources, the company has developed an effective education system for all levels of management from top management through middle management to the workers, with a priority focus on the customer.
Training of employees is based on the concept of education and development of employees. For each year, funding for education, time table, methods, individual training modules and the exact number of employees to be educated are provided. Employees are educated through external and internal forms.
In terms of distance education, we mean intensive training of top employees. This education is provided by external educational institutions. Internal training takes place within the company and is intended for middle management and workers.
In the context of measurable indicators of efficiency of investment in human resources, we analysed the first indicator—wage conditions and business benefits for employees because rewarding of employees is part of the process of preserving and maintaining an effective workforce. According to the relevant tariff class, employees gain tariff salary determined by the applicable tariff. There is the guarantee that employees are entitled to tariff-based payment, i.
Except for wages, employees were entitled to a wide range of financial and nonfinancial benefits in terms of business benefits. This advantage was connected with compulsory employment after finishing the school for a selected period of time. Although the average monthly wage compared to the average monthly wage in Slovakia is lower, which reduces the attractiveness of the selected enterprise for job seekers, employees are provided with a variety of benefits that motivate them to perform.
The value of the intellectual capital of the company is closely linked to the increasing or decreasing trends in the number of employees who come into the company and thus increase the value of the intellectual capital. Average monthly income is one indicator of the effectiveness of the investment to employees. Effectiveness indicator is based on the idea that the value of individual employees is determined by wages, i. The average monthly salary, presented in Table 3 , was during the monitored period developing in a variable rate.
Even though the average monthly salary was less than the average monthly wage in the Slovak Republic, its slight increase might be taken as a promising positive development for the future. Employee turnover was the third measurable indicator of efficiency of investment in human resources.
In Table 4 , we examined the turnover of employees within the enterprise, which may not be viewed only as a negative phenomenon. Sometimes, some low turnover rate may be even necessary, as it enables the company to maintain its potential for innovation and growth.
Staff turnover rate in the period — decreased gradually. That indicates a positive development in staff turnover. For companies, it is important to identify the reasons for losing their workers and, therefore, it is of key importance to pay more attention to employees who are considering changing their jobs and to understand their unfulfilled needs and expectations. On the other hand, reasons for the leaving of employees are often results of the decision of their employer.
In the monitored period —, it was necessary to terminate the contracts of 20 employees. Another most common reason for leaving the company was inadequate salaries, as reported by workers. We recommend the company to identify the reasons for dissatisfaction of existing staff as well as the reasons for leaving of former employees.
That will enable the company to properly identify the reasons for departure and to implement changes in the system of rewarding and motivation of employees that will eventually prevent further loss of human capital. The results of the monthly labour productivity from sales and value added during the monitored period — are shown in Table 5.
The growth of labour productivity is important for the performance of the company because it leads to savings in expenditure of labour and labour costs. We recommend the company to focus on examining the relationship between labour productivity and the system of rewarding in the company, with special emphasis on the needs and particularities of human capital, because it is human capital in the company that is able to create value. Human capital value added HCVA is another important indicator of economic efficiency of human resources in the company, which reflects the participation of employees in added value when the added value is created by revenue net of costs excluding labour costs—labour costs and employee benefits.
It is presented in Table 6. Human capital value added HCVA belongs among the indicators of the overall efficiency of utilisation of human resources. Thus, based on the research results, we may conclude that the analysed company uses its human resources effectively. It is generally understood that via the abilities, skills and knowledge of its employees, the company can strengthen its competitiveness in the market.
Quality technology available does not secure maximum performance because it is the employees who create added value in the company as bearers of human capital, and without employees, no technical achievements could be properly utilised. This sum included trainings for middle managers and individual workers. The overall costs per training module were divided by the total number of participants in various target groups. Resources for internal training were divided into five training modules.
These five modules are presented in Table 7. After identifying the range of training modules and the number of participating employees, average investment in training and staff development were analysed. On the basis of research done, we can state that the company has an elaborate system of quality education. Moreover, the company seeks to continuously improve this system and spends quite a considerable sum of money on education of their employees.
Different organizations have different takes on how to nurture their employees. Some organizations even pay for tuition for their employees. However, the concept of nurturing an employee comes down to how effectively the leaders choose to do it. The first mistake to avoid is hiring a non-competent leader. In fact, it is the only mistake you need to avoid, as the rest of the mistakes are made by leaders themselves. The mistakes made in nurturing employees are all personal. Most of the workforce today are millennials.
Not recognizing them for who they are, is a mistake. Negative criticism about work should not be so strong that it affects the mental health of the individual. It should be the growth and development of the firm, along with the personal and professional growth of the employee. You are getting effective returns. Now, this pretty much depends on the individual, but all of the above factors summed up should keep the employee retained. However, it is always good to remind them why they are there.
It is always good to keep them reminded of how they got to where they are and why they are still there. Now here, the loop starts again. One employee decides to leave, and you start searching for talent clones, and then the mistakes repeat themselves - Season 2! Although most organizations today do it - not taking an exit interview is a huge mistake. As we come to the end of this article, it is good to reflect on how important your employees are for your organization.
It is vital to invest in them and aid their growth. I hope this article helps you with better engagement and provides you with better return on the investment you make on your human capital. I would like to conclude by quoting Dee Hock,.
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