Encouraging employers to use human capital reporting: A Literature Review of Implementation Options
This literature review explores options to encourage employers to adopt and use human capital reporting (HCR), in which employees are not solely seen as a cost but also as an intangible asset to their organisation. Greater HCR is seen as a way to optimise employer investment in workforce skills.
Briefing paper : Encouraging employers to use human capital reporting: A Literature Review of Implementation Options (PDF, 417 Kb)
Published February 2013
The issue about how human capital should be reported through accountancy and reporting procedures is generally referred to as human capital reporting (HCR). Greater HCR is seen as one possible way towards improving in-firm information, the failure of which is a key barrier to optimising employer investment in skills. It is also seen as a way to counter another dimension of market failure, short-termism.
This literature review seeks to contribute additional knowledge and understanding to this particular policy lever. The use of HCR, as a way to counter aspects of information failure and short-termism, was originally considered alongside other measures as part of the UK Commission for Employment and Skills’ Review of Employer Collective Measures.
RAND Europe builds on this by exploring the possible options for the future of HCR, in private and public sector organisations, in the UK. The review focuses on three broad areas across the mandatory/voluntary spectrum of the reporting of human capital:
- Regulation – mandatory changes to the financial reporting standards which would oblige organisations to provide data on their investments and activities in this area.
- Code of practice / best practice guidance – semi-voluntary change as a result of which organisations would be encouraged to provide details of what they have done relative to the best practice code.
- Cultural shift – voluntary change towards the development of a common view that HCR is the ‘right thing to do’.
Key academic contributions and industry practice are identified from the UK and internationally. The policy context around HCR in the UK is also established; and current and future reporting requirements, regarding human capital, are also examined.
