These are some of the Benefits of HRA:
1. The adoption of the system of HRA discloses the value of human resources. This helps in the proper interpretation of Return on Capital Employed. Such information would provide a long-term perspective on business performance, which would be more reliable than the Return on Capital Employed under the conventional system of accounting.
2. The maintenance of detailed records relating to internal human resources (i.e., employees) improves managerial decision-making, especially in institutions like direct recruitment versus promotions; transfer versus retention; retrenchment or relieving versus retention; the utility of cost reduction programs considering their possible impact on human relations; and the impact of budgetary control on human relations and organizational behavior. Thus, the use of HRA will definitely improve the quality of management.
3. The adoption of the system of HRA serves social purposes by identifying human resources as a valuable asset. This identification helps prevent misuse and underuse due to thoughtless or reckless transfers, demotions, layoffs, and day-to-day maltreatment by supervisors and other superiors in the administrative hierarchy. It also promotes efficient allocation of resources in the economy, efficiency in the use of human resources, and a proper understanding of the negative effects of avoidable labor unrest/disputes on the quality of internal human resources.
4. The system of HRA would undoubtedly pave the way for increased productivity of human resources. The fact that a monetary value is attached to human resources and that human talents, devotion, and skills are considered valuable assets and are allotted a place in the financial statements of the organization would boost the morale, loyalty, and initiative of the employees. This would create in their minds a sense of belonging towards the organization and act as a great incentive, leading to increased productivity.
Hope this information is sufficient.