Labour CostBy:- Sagar Wadhawani Chinmay Vichare Rohit Umrao Mamta Thakur

Objectives • Direct and indirect labours.

• Labour turnover.

• Time keeping and time booking.

• Overtime.

• Payroll.

• Idle time

• Remuneration.

• Incentives plans.

Direct and Indirect labour

• Direct.

• Indirect.

Organization for accounting and control of labour cost• Departments –

Personal

Engineering

Time keeping

Payroll

Cost accounting

Labour Turnover• Measurement methos

1. Seperation

2. Replacement

3. Flux

Causes of Labour Turnover

• Avoidable causes.

• Unavoidable causes.

Reduction and control • Suitable wage policy.

• Healthy and efficient working condition.

• Impartial and systematic attitude of personal management.

• Promotional opportunities.

• Labour participation.

• Taking welfare measures.

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Time keeping & Time Booking• Time keeping – recording arrival and departure time of

workers for attendence purpose and for calculations of wages,

• Time booking – recording time send by workers on different jobs or processess for determining labour cost of job/process.

MethodsTime keeping

• Attendence register.

• Token or disc method.

• Time recording cocks

Time booking

• Job ticket

• Daily time sheet

• Weekly time sheet

• Piece work card

Overtime Disadvantages

Excessive labour cost.

Decrease in labour productivity.

Increase in lighting cost.

Effect on health of workers.

Increase in wages.

Treatment of overtime

• When overtime is job specific.

• When overtime is due to general pressure.

• When overtime is due to abnornal reasons.

Control of overtime• All overtime premium should be authorised by works

manager.

• It should be seperatly recorded for future planning.

• Total overtime premiun should be daily reported to the manager.

• When overtime becomes permanent feature, then steps should be taken to cope wid additional work.

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Payroll department• Responsible for computation and disbursement of wages

payable.

• Records hours worked and wages earned.

Functions of payroll department

To maintain records of job classification.

To verify and summarize the time of each worker.

To prepare the payroll and compute the wages.

To compute payroll deduction

To maintain payroll record of each employee.

Wage SheetCausual workers

Out-worker

Payroll Department

Idle Time• ‘Idle time represents time lost by workers who are paid on

time bais’.

Causes

• Productive

• Administrative

• economic

Treatment

• Normal

• abnormal

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Remuneration

Time rate system

• Workers are paid according to the time for witch they work.

wages = no. of hrs worked X rate per hr

• Eg: If worker is paid at the rate of Rs 25 per hrs, his wage for the day of 8 hrs will be ---

8 X 25 = Rs 200

Time rate systemAdvantages

• Simplicity

• Security of workers

• Quality of work

• Accepted by trade unions

• economical

Disadvantages

• No incentives

• Low quality

• Extra supervision cost

• Costing difficulties

• Idle time

Piece rate system• Wages under this system are paid according to the quantity of

work done.

wages = rate per unit X No. of units produce

Eg :- if rate per unit is 17, and during a day a worker has completed 10 units , then his wage will be……

Rs 17 X 10 units = Rs 170

Piece rate systemAdvantages

• Incentives to efficient workers.

• Increase in production.

• Lower cost.

• Equitable.

• Decrease in supervision.

• Simple.

Disadvantages

• Poor quality of work

• No security of wages.

• Misuse of material and equipment.

• Injurious to health of workers.

• Opposed by trade unions.

Incentive planes

Halsey premiun plan & Halsey Weird plan.• Paid at a rate per hour.

• If worker takes standard time or more time he is paid for the actual time taken at the time rate.

• If worker takes less than the standard time , then he is paid a bonus equal to 50% of the time saved.

Eg:- std time = 50 hrs

Wage rate per hour = Rs 3

actual time taken =42 hrs

time saved = 50 -42 =8 hrs

Earnings = 3 X 42 + 50% 0f [8 hrs X 3]

=126+12 =Rs138

Rowan Plan• Wages are paid on time bases.

• If worker takes standard time or more time he is paid for the actual time taken.

• If worker takes less than the standard time , then he is paid a bonus.

Eg:- std time = 50 hrs

Wage rate per hour = Rs 3

actual time taken =42 hrs

time saved = 50 -42 =8 hrs

Bonus = time saved /time allowed X time taken X time rate ==20.16

Earnings = 3 X 42 + bonus

=126+20.16 =Rs146.16

Taylor’s differential piece rate system• Day wages are not guaranteed.

• Lower rate & higher rate.

• Eg :- std production = 8 units per hr

working hrs per day = 8 hrs

lower rate = Rs 5 per unit

higher rate = Rs 8.75 per unit

worker X = 7 units

worker Y = 9 units

:- wages of worker X --- 7 X 5 = Rs 35

Wages of worker Y ---- 9 X 8.75 = Rs 78.75

Merrick’s differential piece rate system

Level of efficiency Piece rate

Upto 83%83% to 100%Above 100%

Ordinay piece rate110% of piece rate120% of piece rate

References

• http://en.wikipedia.org/wiki/Incentive_program

• http://smallbusiness.chron.com/incentive-plans-1776.html

• http://managementstudyguide.com/employee-remuneration.htm

• http://www.business-case-analysis.com/direct-labor.html

• http://dictionary.reference.com/browse/Incentives.

Thank you for your Attention