Presentation on Labour cost

Introduction  Labour cost represent the human contribution to production is an important cost factor which requires constant control, measurement, and analysis.  Types of labour  Direct labour  Indirect labour

 How to control labour cost  To attain the objective of controlling and reducing labour cost the following factors must be kept in mind  Appointment and selection of employees  Maintain labour records  Control over arrival and departure time of employees  Labour cost analysis  Determination and payment of wages

Major deptt.for effective conrol over labour cost Personnel deptt Engineering deptt Cost accounting deptt Time-keeping deptt Payroll deptt

 Personnel deptt. Main function of personnel deptt is recruitment and selection of works providing training and placing them to jobs.Following are the two important documents used in connection with appointment & placement a)Employee placement requisition b)Employee history card 

LABOUR TURNOVER  Labour turnover denotes the percentage change in labour force of an organization. The ratio of replaced workers to the total no of workers is the labour turnover ratio

Causes of labour turnover Personal causesUnavoidable causesAvoidable causes

MEASUREMENT OF LABOUR TURNOVER 3 methods are there:- 1)Seperation method:- Labour turnover= no of employee left during period ____________________ *100 Avg. no of employees During period

2)Replacement method:- Labour turnover= No of workers replace during a period _______________________ *100 Avg. no of workers during a period

3)flux method :- Labour turnover= no of separations + no of addition _________________________ *100 Avg no of employees during period

EFFECTS OF LABOUR TURNOVER The turnover below normal rate is low turnover and turnover in excess of normal rate is high turnover  So, high labour turnover has following reasons:-  a)intruption in production  b)time wastages  c)cost increase  d)faulty handling of machines  e)more accidents

REDUCTION OF LABOUR TURNOVER  creation of distinction between efficient and inefficient workers  good working conditions  non monetary benefits

Cost of labour turnover Preventive cost Replacement cost

Engineering deptt:-  This deptt maintain control over the product methods and working conditions for each job, deptt and process. 

FUNCTIONS OF ENGINEERING DEPTT.  preparation of production peans  inspection of production process  undertaking research  maintain safety conditions to prevent accidents  conduct time and nation study  determination of rates according to time

TIME KEEPING DEPTT:- Time record is divided into two parts Time booking Time keeping

it records the arrival and depature time of each workers.Time keeping is concerned with attendance & wage calculation of employees.Time booking means recording the time actually spent by a worker on various job done by him.

Labour time records used for time booking are:- a)Daily time sheet b)Weekly time sheet c)job card d)combined time &job card e)piece work card

PAY ROLL DEPTT:-  Responsible for making payment of wages & salary to each employee Functions are:- 1)to keep wage record for each worker 2)to verify time 3)to calculate wages earned by each employees 4)to make payment of wa ges

COST A/C ING DEPTT :-  responsible for collection and classification of all labour costs with the help of time cards, labour cost of various jobs, work orders etc.

IDLE TIME  It is that time for which employees pay,but from which he obtains no production.in other words idle time is time when the worker does no work and remains idle.

CAUSES OF IDLE TIME  lack of proper planning  bad management  serve competition  trade depression  time lost between gate and place of work  waiting for rawmaterials etc. 

Types of IDLE TIME  NORMAL IDLE TIME  ABNORMAL IDLE TIME

NORMAL IDLE TIME:-  normal idle time is one which is incidental to production. it represents the time,wastage of which cannot be avoided.  E..g.s:-1)time lost between gate & place of work  2)time lost between one job and other  3)time lost in setting machine  4)time require for tea-breaks etc.

ABNORMAL IDLE TIME:-  the idle time which can be avoided it proper precautions are taken.  E.g.s:-  1)idle time wasted due to strikes  2)idle time wasted due to power failure  3)idle time wasted due to machine breakdown.  4)idle time wasted due to time two,flood or storm

OVERTIME:-  The time worked over and above normal hours is overtime  NEED OF OVERTIME  1)overtime may be needed for execution of urgent orders  2)due to break down of machinery during normal hours  3)for utilizing perishable raw material by working overtime 

DISADVANTAGES OF OVERTIME a)it increases cost of production as overtime is paid,at higher rate b)Workers health is adversely affected c)workers will adopt the habit of postponing the work to be done in overtime just to earn more wages

METHODS OF WAGE PAYMENT  Wage means the payment made to a worker for his work  CHARACTAISTICS OF GOOD WAGE SYSTM 1)simple 2)incentive oriented 3)flexible 4)minimum wage guaranteed

5)related to efficiency 6)quality output 7)minimum absentism 8)equality

System of wage payment TIME WAGE RATE SYSTEM PIECE WAGE RATE SYSTEM INCENTIVE WAGE RATE SYSTEM

TIME WAGE RATE SYSTEM :-  TOTAL EARNINGS = HOURS * RATE PER WORKED HOUR ADVANTAGES a)simple b)guranteed minimum wage c)no differentiation between efficient & inefficient workers

DISADVANTAGES  1)no distinction between efficient & inefficient workers  2)more supervision expenses to stop misuse of time  3)decrease in productivity  4)discourage efficient workers 

PIECE WAGE RATE SYSTEM:-  In this workers are paid on the basis of work done irrespective of time taken by worker.  EARNINGS = No of * rate per  Units unit

ADVANTAGES 1)It is simple to understand & opuate 2)payment according to work done 3)increase in production 4)idle time is reduced as workers are not paid for time wasted on the job 5)reduces supervision cost

DISADVANTAGES:- a)quality of work will suffer b) insecurity in wages if workers not due to some reason c)bad effect on workers health because they work more hours for more wages d)trade union often oppose this system

INCENTIVE WAGE RATE SYSTEM:-  In incentive wage rate system each workers gets not only wages at normal rate but also receives bonus or premium for his efficiency.this system induces worker to work more and earn more.  Bonus means benefits to workers.

Two incentive plans are Group bonus plan Individual bonus plan

conclusion