Prepared by Chintan Pawaskar C08 Romil Malde C38 Deepak Kharatmol C10 Nivedita Sarode C23 Shweta Jogdand

C45 Rutuja Nene C51

Cost of labour Sum of all wages paid to employees as well as the cost of employee benefits and payroll taxes paid by an employer Objectives Determining labour cost in the cost of goods or service Reporting labour cost for planning & control Reporting labour cost for decision making

Direct labour cost Consist of wages paid to the workers which are actually involved in manufacturing process Ex. Line workers, machine operators, etc Indirect labour cost Consist of salaries paid to labours which are not directly engaged in manufacturing process Ex. Supervisors, time keeper, office staff, etc

Personnel department Engineering department Time keeping department Payroll department Cost accounting department

 Main function is to provide efficient labour force Prepares employees record card on engaging a new worker Personnel manager is responsible for the execution of labour policies

 Maintains control over production methods & working conditions for each job & department Prepares plan & specification for each job scheduled Survey & inspection of production activities Safety & efficient working conditions

 Prepares record of time spent by each employee Determines total working hours for each employee so that his earning can be calculated Also records attendance details of employees

 Clock card Disc methods Attendance record

 It means recording time spent by employee in each job, process or operation Objectives To determine amount of labour cost To determine value & quantity of work done To determine performance bonus

Job tickets Job cards Weekly time sheets Daily time sheets

To prepare payroll from clock cards, job or time sheets Functions To compute employee wages To prepare departmental payroll summaries To distribute salary & wage payments To compute payroll deductions, taxes To verify & summaries time of each worker as shown in daily time cards

 Keeps records related with cost of material, labour and expenses It analyzes all costs of manufacturing, marketing and administration It generates control reports and data for decision making to the executives

 It is important aspect labour cost control Objectives of wage system Acceptance by employees to avert slowdowns Stabilization of labour turnover Provision for incentive plans Provision for flexibility

Straight time Under this basis the worker is paid at hourly, weekly or daily basis & his remuneration depends upon time for which he is employed From employer point of view this method is easy to compute & provide economy in time keeping & payroll recording Most popular method for workers such as clerks, accountants, factory helpers

Piece work Under this method fixed rate is paid for each unit produced or job performed Advantages Efficiency is recognized Motivates the worker Lesser supervision Less idle time Computation of labor cost in advance is easy

Disadvantages Quality suffers Difficult of fixing standard output & piece rate Uncertainty in income More scrap & defective work

Basic purpose is to induce worker to produce more so he can earn higher wages & at the same time unit cost can be reduced

Objectives : Higher production without dispute between labor & management Stability in labor turnover Reduce absenteeism It improves adminstrative efficiency

 Taylor Differential piece-rate system Under this system there are two wage rate i.e., A Low wage rate for output below standard and a Higher wage rate for output above standard performance The system aims to discourage below average workers by Providing no guaranteed hourly wage Setting low piece rate for low level production and high rate resulting in high earning

 Example : Worker Earnings Working Hours Average Production Unit Cost Rs. 240 / day 8 / day 12 units / 1hr. / one worker 2.5 / unit

Rs. 2 / unit
Rs. 3 / unit

Production Averaged to 14 units or less / hr.

Production Averaged to 15 units or more / hr.

 Gantt task & Bonus plan This system combines a GUARANTEED time rate with a bonus and piece rate plan using the differential piece rate principle Plan provides incentives and opportunities to those who reach high level production Provides security and encouragement to the less skilled workers workers are also satisfied in that they receive the total reward for their efforts

 Example : Output Output Below Standards (high task) Output At Standards Payment Time rate (Guaranteed) Bonus on the time rate

Output Above Standards

High piece rate on workers whole output

 Basic wages
Time based systems
Total Wages = Hours x Basic rate of + Overtime hour worked + Overtime premium Worked pay per hour per hour Piece works systems Basic earnings = Unit Produced x Rate of Pay per unit

Idle time
Idle time Ratio Idle time Ratio=
Idle time X 100 Total attendance Time

 Labour turnover
Separation Method Labour Turnover = No. of separation during the period x 100 Average No. of Workers during the period Replacement Method Labour Turnover= No. of Workers Replaced during the period Average No. of Workers during the period Flux method Labour Turnover= No. of Separation + No. of ReplacementX100 Average No. of Workers during the period

Illustration:

From the following information, calculate labour turnover ratio and turnover flux rate No. of workers as on 1" Jan. 2003 = 7,600 No. of workers as on 31" Dec. 2003 = 8,400 During the year, 80 workers left while 320 workers were discharged, 1,500 workers were recruited during the year of these, 300 workers were recruited because of exits and the rest were recruited in accordance with expansion plans.
Solution: Labour Turnover Ratio (1) Replacement Method: No. of Replacement = 300 workers Average No. of Workers = 7600 + 8400 2

= 8000

 Labour Turnover

= No. of Replacement x 100 Average No. of Workers 300 8000 = 3.75 % x 100

FLUX METHOD

= No of Separation + No of Replacement Average No. of workers 1500 + 400 X 100 = 23.75 % 8000

X 100