Explain the Rate of Return Approach of Human Resource Planning?

Rate of Return Approach (cost benefit): One of the most under measured parts of a business is the human resource capital and it represents one of the biggest challenges facing business, namely finding the best and brightest people. It is these human resources or people who ultimately create value for the organization. People generate value through their application of skills, talents, and abilities. The key is to invest in people so that human resources are productive, knowledgeable, effective, and efficient.

This is what separates the average company from the exceptional. Getting a return on this investment is extremely important. There are costs associated
with acquiring personnel, such as advertising, agency fees, and relocation costs. The next level down is time, i.e. how long did it take us to recruit a new employee. Quantity would be the number of applications processed. All this processing posses’ rate of interest on an organization.

There are mainly three parameters which involve in the rate of interest:

  • Costs of education.
  • Returns to education.
  • Discount rate.

Returns to education means that a person can be benefited by educating himself. A person can decide that he can educate himself and there are no constrains on that. It is immaterial that his legal school learning age is over. He can even continue beyond that.

Returns to education can be direct, indirect and non-benefit returns. In case of direct returns are the earnings because of schooling’s. Some of the companies allow and employees are encouraged to pursue educational and academic programs that help in their career growth. They are eligible for benefits like:

Retirement Benefits: Retirement benefits include provident fund and gratuity.

  • Provident Fund: Loans or advances under the scheme are governed by the rules and clauses of the Provident Fund Act, as applicable.
  • Gratuity: Gratuity is payable on retirement from the service or separation from the company or in the event of death. The age of retirement as envisaged by some of the companies.

Wellness and Fitness Programs:

Many of the companies organize various programs to help employees manage their stress and keep themselves healthy. The primary objective of such programs is to promote health awareness amongst employees. As part of such initiatives, a variety of topics on, health and wellness are discussed.

Most of the companies may be public or private have a scheme where all employees are covered under a comprehensive group insurance plan from the time of their joining. The personal accidental and life insurance policy covers the employees against death or physical disability due to accidents. The group insurance ensures that the employees along with their dependent family members are fully covered.

Indirect monetary benefits are the ones which a person acquires not only because of his initial education but they are because of the experience they gain during the course of learning. Subsequently after some years they gain experience and which fetch them more better jobs. Opportunities are indirect monetary benefits. Education increases the earning capacity of and also increases their propensity to remain in the labor market.

Non-monetary Benefits: Education is must for the uplift of the society. This is because only an educated person can do wonders for the environment and surroundings. Cost of education ones occurred gives a lifetime support. Various methods are suggested for measuring the non-monetary benefits of education, such as the inter-generation effect of a mother’s education on the future achievement of her children, or the non-pecuniary benefits of employment for women in the labor force.

There exists a difference between the returns to education for men and women is less than is often suggested, particularly if some attempt is made to measure non-monetary benefits.

But the returns to women’s education would be increased if there were a change in traditional attitudes leading to a more equal occupational distribution and better utilization of women in the labor force. Also in case of indirect monetary benefit the best example seen is that the educated people can save money on their wards tuition and make the best use of their education by imparting best knowledge to them.

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