What Are "Non-Human Expenses" and What Exactly Falls Under This Category?

Dear Seniors,

Please let me know, what is "Non-Human Expenses"? What falls under this category?

Regards,
Durga

Hi Durga,

Can you define what exactly you mean by Human Expenses? And in what reference? In HR, there is no reference of Non-Human Expenses. Is it charity-related or some non-profit organization kind of transaction?

Regards,
Sawant

Could you please explain the following terms referring to the formulas below:

- Contingent Labor Cost
- Nonhuman Expenses
- FTEs

1. Attrition Rate
Total number of people who left the organization in the period / (Headcount at the start of the period + Heads recruited during the period)

2. Manpower Turnover
Total number of people who left the organization in the period / Average headcount in the period

3. Human Capital ROI
This measures the return on capital invested in pay and benefits. The formula is:
Revenue - Nonhuman Expenses
Pay and Benefits
Pay includes all money spent on regular and contingent labor.

4. Human Capital Value Added
This uses a similar formula to Human Capital ROI but divides by the number of full-time equivalent employees (FTEs). The formula is:
Revenue - Nonhuman Expenses
Full-Time Equivalents
This yields a profit per FTE. These two measures are views of the profitability attributable to human effort.

5. Human Capital Cost
This is simply the average pay per regular employee. The formula is:
Pay + Benefits + Contingent Labor Cost
Full-Time Equivalents
It can be augmented by adding in contingent labor. In that case, we would take total labor expenses, including benefits costs, and divide by FTEs, including contingents.

6. Human Economic Value Added
This is net operating profit after tax, minus the cost of capital divided by FTEs, including contingent labor. The formula is:
Net operating profit after tax - Cost of capital
FTEs

7. Human Market Value Added
This divides market capitalization by FTEs, including contingents. The formula is:
Market Capitalization
FTEs

Hi there,

I hope following explanations and simplification of definations will enable you to have better understanding on the above.

Guiding Principles
“The principal criticism of human capital measurement is that it is neither as consistent nor as accurate as financial information. This is because people have started measurement programs by adopting unproven external metrics or by making up their own. When the system is not standardized, everyone who comes along is free to change it to suit their personal needs. Then there is no way to compare their view with that of others, since the definitions are idiosyncratic. They build a modern Tower of Babel. However, when a standard set of metrics is established and used consistently over a long period, they are as accurate as a financial system.
One of the major barriers to measuring qualitative, intangible human capital factors is the belief that we cannot demonstrate cause and effect. Many unknown and unknowable forces constantly in action make it impossible to prove anything in business. Nevertheless, being clear about our destinations, knowing the positive and negative forces along the way, and understanding the process necessary for the journey increase the odds that we will travel by the most expeditious route and arrive ahead of the hunch players.

Contingent Labour Cost –
Labour Cost that arise from ad-hoc payment on account of any agreement, court orders or settlement of wage agreement outside unforeseen budget provisions.

Human Capital Revenue
Revenue divided by FTEs
Human Capital Cost:
Average cost of pay, benefits, absence, turnover, and contingents
Contingent Percentage:
Number of contingent FTEs as a percentage of total FTEs
Total Labor Cost Revenue:
Percentage All labor costs as a percentage of total revenue
Human Capital ROI
Revenue ‑ (expense ‑ total labor cost), divided by total labor cost Human Capital Value Added
Revenue ‑ (expense‑ total labor cost), divided by FTEs
Human Economic Value Added:
Net operating profit after tax ‑ cost of capital, divided by FTEs
Human Market Value Added:
Ratio of market value to book value, divided by FTEs
Regards

Sawant