The Relationship between HR Expenditure and Firm's Performance: Case of S&P BSE SENSEX 30 Companies

In today’s dynamic business environment, for companies to exist, they must continuously look for areas for improvement and gain competitive advantage. It therefore becomes quintessential for companies to know which factors can have a positive effect on the company’s performance. The purpose of this article is thus to explore if there a relationship between the HR expenses of an Indian company and its financial performance and is this impact positive enough to motivate these companies to augment such efforts in improving the HR management practices. For, this purpose, data on expenditure on human resource and profit after tax (PAT) for BSE- SENSEX 30 companies was extracted for the period of10 years. In order to test the hypothesis of this study, correlation and regression analyses were performed. Results of correlation revealed that HR expenditures are positively related to Firms performance. The findings from regression analysis revealed that HR expenditure have statistically significant effect on a firm’s financial performance.