Human Capital

(Resources)

Grade 12
Definition:
Human capital function include all
activities and decisions to improve
the effectiveness of the Human
resources (employees) and the
business.
Importance and aim of the Human Capital department:
•Aim is to bridge the gap between management goals and needs of
the workforce.
•Task of the Human Capital (personnel) function is to manage
employees and to maximize their potential, enabling the business to
achieve its mission.
•They must also make sure the comply with labour legislation
 • Interpretation of employer/employee needs
The HC • Co-ordination of management and staff
requirements
Function • Implement manpower planning, recruitment,
focuses on selection, placement, induction, and training,
keeping records and implementing relevant
administration systems such as fair
remuneration.
 2. Human Resource Activities
1.How Many employees 2.What skills do
are needed? employees need ? 3.When are they
needed?
1. Man Power Planning

Job Analysis
A systematic method of obtaining
Techniques all info about the tasks related to a
specific job
Techniques (different ways):
• Interview current worker
• Observe worker
• Questionnaire
Job Description  about Job
• Summarizes info collected Job Specification about Worker
through job analysis such as : Purpose is to find out:
• Minimum Ability of the worker
Duties, responsibilities, level of
• Experience
authority • Education
• What is done, when, where, • Physical requirements/ other
how Skills
2. RECRUITING…
FINDING EMPLOYEES
• Seeks to attract Job applicants with the right skills and motivation to cover manpower
shortages
• The recruitment planner decides if the job is suitable for internal or external recruitment.

Within the Firm Outside of the firm

 INTERNAL RECRUITING…use the following techniques
• Job posting – the employer notifies all present employees of the
RECRUITI vacancies that exist and those who think they may qualify put
forward their name to be considered for specific vacancies.
NG… • Skills inventories – the organisation searches its files for
potentially qualified candidates by looking at skills inventories and
candidates that are identified are contacted and asked if they
want to apply.
• Hybrid (combination) – recommendations by present employees
is a hybrid of an internal and partly external source.
 External Recruiting
• External recruiting creates the
opportunity to bring new and fresh
skills into the organisation.
• Advertising in external sources will
depend on the type of job to be
filled, the skills needed as well as
the location of the firm. They
include:
• Advertising in newspapers, trade
journals, radio, window displays and
notice boards.
• Schools, colleges, universities and
other educational institutions.
• Private and public employment
agencies.
• Casual applicants or so-called
“walk-ins”.
• Internet recruitment businesses.
• Head hunting

• What are the advantages and

disadvantages of each type
What is wrong with the following job
adverts?
IEB PAST PAPER
3. Selection
• Involves screening and
choosing most suitable
candidate.
• While recruitment activity is
positive, the selection activity
is negative because it is aimed
at excluding unsuitable
applicants whose
skills/experience do not match
requirements as per job
specification.
• A good selection process could
result in lower turnover of staff
and production costs, less
training and higher
productivity.
• Standard selection procedures
often involve the following
(depending on seniority)
 1. Receipt of the application
forms/CV’s:
2. Initial screening:
Standard 3. CV/Job application
selection evaluation:
procedur 4. Reference and background
checks:
es often 5. Interview of candidates on
involve the short list:
6. Tests and examinations:
the
7. Letter of appointment:
following 8. Employment contracts:
 Standard selection procedures
often involve the following

3.1 Receipt of the application forms/CV’s:

• Once vacant post has been advertised, the HR
manager must be available to ANSWER QUERIES
• Documentation /C.V’s and application forms are
checked.
3.2 Initial screening:
• Purpose – to identify applicants who DO NOT MEET
REQUIREMENTS  inform them accordingly.
• Generally, the advert will state that if a person is
not contacted within x weeks, consider the
application unsuccessful.
• Applicants who are suitable are referred to the
3.3 CV/Job
application
evaluation:

• A selection panel
evaluates the CV’s of
applicants who meet
the minimum
requirements.
• A pre-determined set
of criteria will be used
– usually a 7-point
scoring system to
evaluate applicants in
each category.
• Applicants are then
ranked according to
total scores achieved
on CV evaluation.
• A short list of
applicants is then
drawn up.
3.4 Reference and background
checks:

• Applicants on the short list

are potential new employees
and info supplied in the CV
needs to be verified.
• Employment records and
qualifications will be checked,
and personnel manager
communicate with referees to
ask relevant, standardise
questions about the applicant
which may not be included in
the CV. ( i.e., people skills)
 3.5 Interview of
candidates on
the short list

• Interview may be carried out by

one person or a panel.
• Important that the same person
or panel interviews all
applicants to ensure consistency
and fair labour practice.

• Purpose is two-fold:
to get more info from the
applicant to assess his/her
suitability for job
to give more info about the
firm, the job, and the
conditions of employment to
the applicant.
3.6 Tests &
Examinations
• Different types of tests can be used to disclose more
info about the applicant.
• A careful selection must be made as Employment
Equity Act prohibits the use of tests that discriminates
against a person on the grounds of culture.
• The following types of test are available:
• Psychometric tests (personality and interest tests,
measuring the applicant’s motivation and
intelligences.)
• Work sample tests – measures the ability of the
candidate to do the work.
• Medical tests – can only be conducted if a certain
health aspect is an inherent requirement of the
job.
 Medical tests:
• The Employment Equity Act states clearly
that no medical examination may be
required unless it is an inherent requirement
of the job or for the purpose of the
distribution of employee benefits.
• This law is also very clear on the
circumstances regarding when HIV/AIDS
testing is allowed.
• The employer may request a medical
examination after a health-related
questionnaire has resulted in any doubt
regarding the medical status of the
employee relating to the requirements.
• Drug and alcohol testing can be permitted.
 3.7 Letter of
appointment
• The selection decision involves the ranking of
the applicants in order of suitability for the
job.
• A written offer of appointment will first be
made to the best person and if this person
accepts (preferably in writing), the other
candidates will be informed in writing that
their applications were not successful –
unless stated otherwise.
• If the best person does not accept, this
process can be repeated until an
appointment is made
• The appointment is not legally binding on
either party until the candidate has signed
the Letter of Employment.
• The process should be observed by staff
representative ( i.e. trade union shop
steward) to ensure fairness
3.8 Employment
contracts

• Employer and employee must agree, draw

up and sign employment contract.
• It is a legally binding document and must
comply with the Basic Conditions of
Employment Act and the employer may
offer better conditions but no less than
those stated in this Act.
• The contract should include at least:
• Employer details – full name and
address
• Employee details – full name, ID no,
address, contact details , tax no., etc
• Employment details – position held,
outline of duties, appointment date,
probation period, hours of work,
permanent or contract appointment,
etc.
• Salary issues – basic starting salary, overtime rate, incentives, deductions e.g. pension, medical
aid, staff association, tax, as well as date of payment (and method), bonus, increases etc.
• Leave details – number of days normal leave per year, sick leave per cycle, leave for personal
affairs, unpaid leave, etc.
• Termination of services – the notice period that must be given by each party as well as
retirement age.
• Any other issues deemed necessary by either party should be included in the contract.
 Remuneration
•Remuneration is the total
compensation offered to an employee
for their services or work.
•Salaries and wages usually amount to
a major share of the business's
expenditure and are also the main
reason and influencing factor why a
worker chooses a particular job or
business.

•Part of the HR function may be to

handle the payroll of business.
•Remuneration is one of the conditions
of employment that keep trade unions
very busy i.e. negotiating with
employers for better remuneration and
higher annual increases.
•Remuneration is determined by the status of each job in the job
hierarchy through job evaluation (process where importance of a
job is investigated to create a job hierarchy), leading to equity
as the remuneration scale is linked directly to the contribution of
each job to the performance of the organisation.

•Job grading/evaluation: not the same as performance

evaluation (employee's performance is evaluated and linked to
• Job evaluation is to create a salary
range or scale within which the
individual's remuneration will be
adjusted based on his performance.

• Most commonly used job evaluation

methods in S.A.:
• Paterson: - base the remuneration
range on the decision-making
responsibility associated with a
particular job.
• Hay: - looks at factors such as level
of knowledge required to do the job
and accountability and problem-
solving skills required.
 Salaries:
• are fixed monthly amounts made to
permanent employees who provide a
professional, skilled or managerial
Salary & Wages function
• in sales industry can include
commission (basic salary plus % of sales
as commission).
• for managerial employees in a big
business can include a performance
bonus in addition to normal salary as
an incentive.

• Wages:
• are weekly payments made to
employees who provide a less skilled
form of labour (can be daily/ monthly)
• are calculated by using different
methods such as time worked or
output delivered (piece rate) or are
alternatively paid at a fixed rate
• Employees may also receive
overtime payment i.e. extra hrs
over a weekend, public holiday
etc.
• Workers in factories, security
companies, hotels etc. that
operate 24 hours per day may be
paid a shift rate.
• The BCEA states that workers
working night shift (6p.m. to
6a.m.) must receive
compensation in the form of an
allowance, time off etc.
• Some businesses may implement
a profit-sharing scheme that may
be seen as a bonus or part of the
salary package.
• Additional benefits offered may be compulsory, e. g. pension
or provident fund, medical aid and UIF in most cases the
worker must belong to the pension fund and medical aid
chosen by the employer.
• The worker contributes to these funds as salary deductions
and the employer then contributes a further amount to the
funds.
These are known as
Fringe benefits and
Further benefits can include: are taxable.
Housing allowance, company car/ transport,
education/ study allowance, meals, discounts,
loans, uniform allowance, 13th cheque or bonus,
entertainment allowance, travel allowance
• The business is compelled to make income tax deductions from employees' salaries.
This takes the form of:
• South Africa has a progressive tax structure, which means the more a person
earns the higher the tax rate. We use PAYE – ‘Pay as your Earn 'Tax system.
In South Africa, you are liable to pay income tax if you earn more than: 237
100 .
• Provisional tax is paid at the standard rates by individuals and organisations who do
not have fixed incomes.
Tax2024
'basic plus benefits' or on a 'cost to company' basis.
• The advantage of a cost to company structure for the employee is
that the salary amount is earned even if a benefit is not taken
whereas in the basic plus benefits an employee loses the benefit if it
is not taken.
Basic plus benefits Cost to Company
Basic of R 180 000 p.a Total package R250 000 p. a.
[Benefits are paid out of this)
Housing of R24 000 p.a
Pension of 10% of basic
Medical aid of R 18 000 p. a.
Car allowance R24 000 p. a.
Possible package is R250
Total possible package is R264 000
000

• An employee taking advantage of all benefits would earn the total package of
R264 000.
2.5
Placement
of Staff
• Some businesses appoint a large
number of people at the same time
for example banks and insurance
companies.
• The abilities of individuals are
compared with the requirements
of the vacant positions and
individuals are placed in the
position that best match their
abilities and the requirements for
the job.
• A candidate might apply for a
specific position but is placed in a
different position where the
business thinks his/her skills may
be better utilised.
• Induction takes place to:
• Let new employees learn the ways the business does things and general
2.6
rules that Induction
apply. of staff
This is not job training and is the same for all employees,
irrespective of specific job.
• Enable new employees to meet new and present employees ( socialize)

• A carefully planned induction process can reduce anxiety, the

programme must be properly spaced over time and should include:
• Most relevant information and policies.
• Knowledge of what supervisors expect, how long it takes to meet expected work standards,
and where to seek help and advice.
• Introduction to fellow workers and people with whom they will work.
• How departments fits into the business, and knowledge of products/services.
 2.7 Training of Staff
• Aimed at improving employee performance and increasing the
efficiency of the firm.
• Training can help to change or improve:
the knowledge, skills and productivity levels of employees
• the behavior and the attitude of the employees.
• To address shortage of skilled labour in SA, the Skills Development Act was
implemented into businesses ( go over aims of the act in Chapter 9 )
• Skills training is aimed at narrowing the gap that may exist between actual
performance levels and the required performance levels.
• A well-planned training process should consist of the following steps:
• Step 1: Analyse business operations to identify problems and determine
skills needed in future
• Step 2: Job analysis will give info on required Skills
• Step 3: Analyse person’s job performance to see if skills are needed
• Step 4: Determine training needs based on above analysis. What
employee needs to be able to do – what the employee can do
• Step 5: Develop training objectives ( what the employee will be able to do
after training
• Step 6: Develop training programme  consisting of the basic skills,
knowledge, attitude and behavioral requirements employees must have, in
the form of lessons printed in a training manual, or short lectures and
demonstrations by management or outsourced trainers.
• Step 7: Train staff methods:
• Step 8: Evaluate training results 
performance vs training objective
 Step 7 –
Training
methods
• On-the-job training that takes place in
the real work situation and is a hands
on approach.
• Off-the-job training, which usually
takes the form of courses, offered by
outsider’s e.g. at the university etc.
• Apprenticeship training which is a
combination of on-the-job and off-
the-job training.
Workshops to promote interaction
or update skills.
Job rotation or multi-skilling, which
expands an employee’s experience
of the business.
• Self study
• Buddy system/mentorship
whereby workers work
together or superiors share
their skills with more junior
employees.
• Learnerships – a student is
given an opportunity to work
within the business whilst
studying (internships) and is
often offered a position in the
business on completion of
studies. Some business
sponsor learners studying in
certain fields and may claim
back a portion of these
expenses from the SDL,
likewise the government also
sponsor learnerships through
 2.8 Evaluation
(performance appraisals)

• Management must continually

carry out efficiency evaluations or
performance appraisals to check
whether training goals have been
met and to assess workers skills
levels and potential shortcomings.

• The appraisal gives management

the opportunity to develop a plan
of action to improve skills where
needed, set goals, give recognition
(progress or good work) and
communicate with individual
workers, giving them an
opportunity to voice concerns or
grievances.
• performance appraisals can be completed by peers,
subordinates or workers themselves

The Functions of a performance appraisal:

• To give feedback to employees and communicate future
expectations
• Pick up areas of strengths & weaknesses and put strategies in
place to deal with weaknesses
• Discuss employment issues such as salary progression,
bonuses, merits, perks , promotional opportunities
 2.9 Retention
• High employee turnover – not good for productivity levels,
public image and
employee morale.
• Important for a business to retain employees, especially
highly skilled and managerial staff because it is costly and
time consuming to recruit and train new employees.
• Changes in staff lead to a slow down in production,
carrying out of strategic plans and a number of other
problems.
• There will always be some ‘natural attrition’ where
workers will leave for legitimate reasons such as spouse
being transferred, health reasons, etc.
Succession Planning

• A succession plan is necessary if a business is to effectively

deal with changes in key positions within the business.
• This is the process whereby key personnel are recruited,
developed and trained to full key positions in the enterprise
( prepared for future promotions)
• There are 5 steps to this
• Identify critical positions
• Determine the skills, knowledge & competencies needed
• Identify succession management strategies ( internal development,
headhunting)
• Implement the chosen plan
• Evaluate the effectiveness of the plan.
2022 IEB Final examination