Labour Cost

By:- 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.
 Till here by sagar

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.
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.
Methods
Time keeping Time booking
• Attendence register. • Job ticket

• Token or disc method. • Daily time sheet

• Time recording cocks • 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.
 Till here by chinmay

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.
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.
 Payroll Department

Causual Out-worker
Wage Sheet
workers
 Idle Time
• ‘Idle time represents time lost by workers who are paid on time bais’.
 Till here rohit
Causes Treatment

• Productive • Normal

• Administrative • abnormal

• economic
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 system
Advantages Disadvantages
• Simplicity • No incentives

• Security of workers • Low quality

• Quality of work • Extra supervision cost

• Accepted by trade unions • Costing difficulties

• economical • 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 system
Advantages Disadvantages
• Incentives to efficient workers. • Poor quality of work

• Increase in production. • No security of wages.

• Lower cost. • Misuse of material and equipment.

• Equitable. • Injurious to health of workers.

• Decrease in supervision. • Opposed by trade unions.

• Simple.
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% Ordinay piece rate
83% to 100% 110% of piece rate
Above 100% 120% 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.