Employees are not assets
Secretary of State for Business, Innovation and Skills Sajid Javid seems to have gotten the wrong end of the stick about balance sheets.
In the foreword of a new consultation document on the apprenticeship levy, Javid lamented the fact that on a balance sheet “each and every one of the company’s employees are listed as ‘liabilities’” while “the ‘assets’ column includes everything from money in the bank to stock in the warehouse”.
“It’s correct in accounting terms, but as a wider attitude it’s entirely wrong,” wrote Javid. “Far from being a liability, the greatest asset any business has is its workers. And like any asset, your people need to be invested in.”
But in accounting terms, Javid is wrong: Employees aren’t a liability or an asset on a balance sheet. “It strikes me as an odd statement,” said Steven Priscott, financial director of Sift and a CIMA member. “They have nothing to do with assets or liabilities on a balance sheet. On statutory accounts, you have to give the number of employees as an information disclosure, that’s it.”
Peter Hollis of Hollis & Co in Sheffield was less diplomatic, “It’s misleading and it’s untrue.”
Taxonomy aside, Javid’s sentiment is also misplaced. According to Rebecca Cave, employees not being seen as an asset on a balance sheet aren’t due to a “wider attitude” within business. Rather it’s because employees "are not owned by the business like cars or buildings,” said Cave.
Referring to employees as assets is a popular one within business. “Our employees are our greatest asset” is commonly doled out by many business people – but they’re not an asset at all.
As Douglas C Wood wrote in Quality Digest, “Assets and people are quite different on several levels. First of all, assets don’t walk out if they are dissatisfied… Assets don’t create; they modify or shape… assets don’t create something that was not there before. Creation is the territory of people.”