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What Is the Difference between Human Capital and Human Resources?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 27 October 2016
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The difference between human capital and human resources lies in the fact that while human resources is focused on the job performed by people, human capital is more concerned with the abilities and training people possess. Human resources may also be defined as a branch in an organization that oversees the recruitment of capable employees, while human capital is the measure of capabilities and skills the human resource department requires from prospective employees. Another way of looking at the difference between human capital and human resources is by looking at the different factors that make up the two concepts.

Human capital can be explained by looking at it from a material point of view. Capital, in its general sense, refers to an investment that is capable of earning returns beyond the initial investment over its life span. For instance, a manufacturing plant may be described as a capital investment that will yield profits to the investors beyond the initial money used to purchase or set up the plant and any other operating costs. In the same sense, capital investments in human beings are also capable of yielding dividends beyond the initial money or investment.

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A differentiating factor between human capital and human resources is that whle human capital refers to returns on investments, one of the responsibilities of human resources is to identify the potential employees who have the type of capital the organization needs. The human resources department also has the responsibility of deciding the ways in which the organization can invest in human capital in order to improve the pool of available employees. Organizations understand that the more the human capital improves, the more the organization will benefit in the long run. This is why some organizations offer their employees training, conferences, seminars and even further education. Such an investment in human capital will yield rewards in the form of improved and more effective employee performance.

Human capital includes apects like education, training, personal development and medical attention. This may be disbursed through schools, mentors, training camps and hospitals. Since human beings are attached to any capital investment concerning their work skills, training or education will always be attached to them, even if they no longer work for the company or organization responsible for the initial capital investment. Such a concept also separates human capital and human resources, since human resources as a department in an organization will always be attached to the organization.

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