Labour cost control

Labour Cost Control

1. UNIT 3 LABOUR COST CONTROL By Prof. Anusha N Bhat

2. Meaning of Labour Labour or manpower represents human resources in production. After material cost, labour cost is the second major element of cost. Higher efficiency of labour helps in lowering the cost per unit of production. Types of labour: Direct Labour: It is that type of labour which directly engaged in production work and can be identified wholly to a particular job, process or cost unit. Example- tailor, carpenter, machine operator etc. Indirect labour: It is that type of labour who are not directly engaged in converting raw materials into finished goods. Such costs cannot be identified with a particular job, process or cost unit. Example- supervisor, inspector, clerk etc.

3. Department under labour cost Personnel department- recruitment and selection of workers, training of workers and development of HR etc. Engineering department- specification of jobs, job analysis, make provision for safe working conditions Time-keeping department- recording of workers time for the purpose of attendance and wage calculation Payroll department- record of job classification and wage rate and computation of wages Cost accounting department- accumulates and classifies all cost data. Submits payroll to the management

4. LABOUR TURNOVER Labour Turnover is defined as “the rate of change in work force in an organisation” it is nothing but the rate of workers leaving the organisation and new workers joining into the organisation. Methods to calculate Labour turnover rate: Separation method: Takes into account only those workers who have left the organisation during a particular period. L abour turnover ratio=  

5. Replacement method: this method takes into account only those workers who have joined in place of those who have left. Labour turn over ratio = Note: Additional workers joined for expansion will not be considered for the computation. Flux method: This shows the complete change in the composition of the labour force due to separation and replacement. Labour turn over ratio=  

6. Causes of Labour Turnover Avoidable causes: Due to seasonal fluctuations Dissatisfaction with job Strained relationship with superiors Lack of proper amenities like medical, recreational centres etc. Lack of proper training facility, inadequate security etc.

7. 2. Unavoidable causes: Change of service for personal betterment. Retirement due to old age and ill health. Death In case of women employees, domestic responsibilities, pregnancy or marriage. Discharge on disciplinary grounds or continous long absence.

8. Control of Labour Turnover Adequate and satisfactory wage system Sound personnel policy for recruitment, induction and training Satisfactory level of various amenities Satisfactory security like family pension, provident fund, accident compensation Good policy for transfers and promotions A grievance cell for the employees can get their grievances get redressed

9. TIME KEEPING Time keeping refers to the recording arrival and departure time of workers for attendance purpose and for calculation of wages. Objectives: Preparation of payroll Attendance records Computing labour cost Computing overhead cost Control of labour cost

10. METHODS OF TIME KEEPING Attendance register Token or disc method Time recording clock Biometric time recording clock

11. Attendance register In this method, attendance of each worker is recorded in the register. The register has sufficient number of columns for attendance of each worker. Entries in the arrival and departure columns may be made by the worker himself or by the foreman. This method is followed in small sized concerns. This method is more suitable for recording the attendance time of clerical staff and other staff officers . Merits: It is simple to maintain attendance register. It is an economical method in comparison to other methods .

12. Demerits : This method is not suitable for medium and large sized businesses. Where the attendance is marked by calling out the names of employees, there will be hold-ups near the factory gate. Dishonest employees may mark the attendance of absentee employee. It involves additional work for posting the entries into the individual working record.

13. Token or disc method Under this method, each worker is allotted an identification number and that number is suitably painted or engraved on a round metal token (or disk) with the hole in it. All such token are hung in a serial order on a board at the factory gate. As the worker arrives he takes his token from the board and puts it in a box kept nearby, which is specially kept for this purpose. After the fixed time the second board is removed. Those coming late have to hand over their token personally at the time office so that exact time of their arrival can be noted. The time office records attendance on the basis of token in the box. The absentees are indicated by the missing tokens. Similar procedure is followed at the departure time in the evening .

14. Merits: It is simple to operate. It does not involve heavy investment. It suits to a factory which employs more number of employees. Demerits: Dishonest practice of inserting a disc of an absentee worker by another employee may take place. It involves more clerical work to prepare an attendance record with the help of disc, where any mistake is committed in recording attendance time on the basis of disc and in case of any disputes between an employee and time keeping officer, disc cannot offer any proof.

15. Time recording clock This method is mechanical in nature. Each worker is allotted a Clock Card which bears his identification number, name department etc. these cards are kept in a rack in a serial order. There are two racks In rack , Out rack. On arrival, the worker will pick up a card from the Out Rack, put it in the slot of the clock, press a button and the exact time is printed on the card. After this the card is put in the in rack. An inspection of the of out rack reveals the absentees. S imilar process is followed if workers leave the factory.

16. Biometric time recording clock It is a new generation technique which is fast replacing the old type of time recording clocks. Biometric time recording clock is an electronic device to record attendance of workers. In this method the worker simply places his fingers or hand on the Finger R eading S ensor and his attendance is recorded in the machine. Merits: Eliminates time card Avoids proxy Eliminates early or wrong punch time Automatic payroll processing Ensures accurate records

17. TIME BOOKING Time booking is recording the time actually spent by a worker on various jobs done by him in the factory for cost analysis and dividing labour cost into various jobs and departments. It also helps in control over wastage of time- idle time . Objectives: To ensure that the time for which a worker is paid is properly utilised To ascertain the labour cost of work done To provide a basis of apportionment of overheads To ascertain the idle time so as to control it

18. METHODS OF TIME BOOKING Job Ticket Combined Time and Job Card Daily Time Sheet Weekly Time Sheet Piece Work Card

19. Job Ticket A job ticket or job card is commonly used for recording the time worked on each job. A card is prepared for each worker and is allotted to the worker who takes up job. The worker enters in this card the time of starting as well as finishing the job. After the completion of the job, the worker submits his work along with the ticket. He is then issued with another job ticket for the next job. This process keeps on continuing. Here one job gets one ticket.

20. Combined Time and Job Card This card combines two in one- the clock card and the job card. It records both attendance time as well as time spent on different jobs. Idle time is automatically revealed as the difference between attendance time and work time.

21. Daily Time Sheet Each worker is daily issued a time sheet in w hich the time spent on the job i s recorded. The sheet must be completed on the same day and handed over to the foreman for signature.

22. Weekly Time Sheet The weekly time sheets record almost the same information as the daily time sheet. The difference is that instead of recording the work done on daily basis, record of work done is entered on a weekly basis. The weekly time sheets need less paper work as compared to daily time sheet. This method proves useful where the jobs are big and their number is small. Example building and construction work, internal decoration etc.

23. Piece Work Card This card is allotted to the workers who are paid on piece basis. This card may be made either for each individual job or for recording the work done on several jobs. This method is based on the units produced and not on the basis of time.