Presented by :

Akshay Bhambri (301)

Nitish Kumar Singh (322)

Rohit Mehta (324)

Harsh Shah (333)

Labour Cost

Wages paid to workers during an accounting period on daily, weekly, monthly, or job basis, plus payroll and related taxes and benefits (if any).

Labour costing is required to be carried out for maintaining proper record of expenditure on payment to the workers.

Labour Cost

The Manager’s Thought - Labour Cost

Major cost of concern

for the HRD

Important part of production

process

Decides price of product

Labour Costs

Direct

That portion of wages or

salaries which can be

identified & charged to a

single costing unit

Indirect Cannot be

correlated with production of

specific goods, applicable to mfg

activities generally (paid to foreman,stockkeeper,clerical staff)

CLASSIFICATION

Basic wage

Idle time

Overtime

Bonus & premiums

Incentive wage plans

Group bonus schemes

Components of Pay Structure

Should satisfy both employees & employer.

System of wages

System of wagesTime Wage or Day Rate

Piece Rate or Piece Work

Financial

•Employees contribution to PF, production & profit bonus, holiday & vacation bonus, old age pension

Non-financial

•Subsidised food & housing, transport to the workplace, employee’s children education, recreational facilities etc.

Types of Incentives

i. Halsey premium planii. Rowan planiii. Taylor’s differential piece rate systemiv. Merrick differential piece rate systemv. Gantt task & bonus planvi. Halsey- weir premium systemvii. Bedaux point premium systemviii.Emerson efficiency system

Types of incentive wage plans

HALSEY PREMIUM

Time taken* rate + %(standard time-time taken)* rate

Time taken* rate +std time – time taken* time taken* rate

Std time

ROWAN SYSTEM

JOB EVALUATION

It enables determination of the most appropriate and effective labour remuneration structure that can be adopted for the enterprise.

It is the comparative analysis and evaluation of the merit of the employees within an enterprise.

Employees can bemerit-rated for promotion

and incremental payments.

MERIT RATING

Inefficiency of labor

Wasting material due to improper supervision

Idle time – normal & abnormal causes.

Unusual overtime work

Inclusion of dummy names in payrolls etc

Quality of goods gets affected due to improper labor control

Why control Labour Cost ?

Personnel / Payroll department

Rate or time & motion study

Production planning – job analysis

Budgeting

Time - keeping

Cost accounting department

Controlling Techniques

Treatment of normal idle time costi. treated as direct wages.ii. treat as an item of factory expenses and recover

as indirect charges.

Treatment of abnormal idle time costi. does not form part of cost of productionii. Additional cost/loss

Idle Time Cost

ELIMINATE ABNORMAL CAUSES & MINIMISE NORMAL ONES

Methods of measuring workforce performance

Labour turnover

Labour productivity

Absenteeism

Labour turnover( High / Low )

Preventive costs

Costs incurred to keep turnover as low as possible

Replacement costs

Costs due to replacement of employees

Turnover and costing

Labour productivity

Output per worker

Total value of Output

Total Number of workers

Cost per unit

Total Labour Cost Number of units

produced

It is the amount of goods and services that a worker produces in a given amount of time

Labour Productivity

Absenteeism

Defined as the number of staff who miss work as a proportion of the total number of staff.

Number of staff absent per time period

x 100 Total number of staff days worked per

time period

Labour Absenteeism

• Fresh workers: daily wages are RMB 20 ,workers work 8 hours a day and 6 full days a week, accounted on time rate basis.

Level 1• Less experienced, paid

monthly salaries, factory adopts a merit rating, and the workers’ salaries depend on their skill levels, paid up to RMB 1,000

Level 2• who include the assistant

supervisor and the supervisor, are paid RMB 1,000 to 1,500 a month. In addition, they are offered a group bonus,.

Level 3

An Industrial Case in China- Easyweld Welding equipment company

Other benefits provided by the companythe factory pays for food and accommodation on

top of labour wages or salaries around RMB 200.

factory also pays RMB 10 a month as social welfare contribution for each worker.

RMB 4 a month as medical insurance for each worker.

In order to encourage staff development, the factory offers a work-related education sponsorship of RMB 600 to RMB 1,000

Labour Turnover – a major issueHigh labour turnover is a significant problem in Guangdong.In recent years, Easyweld has suffered a labour turnover rateof around 20% a year. Usually, this turnover happens whenworkers do not return to work after the Chinese New Year(CNY) holidays. To remedy this situation, the factory offers anannual bonus to its level 3 workers. Half of the annual bonusis paid before the CNY holidays, with the rest paid after theholidays. This type of arrangement provides a useful financialincentive to help the enterprise maintain its workforce

Concluding Remarks

Labour cost accounting involves the study of the behaviour of labour, performance measurement, time and motion studies, control on attendance and government regulations. In modern industrial enterprises the worker’s wage is based upon job evaluation, merit rating, incentive remuneration schemes and government ordinances. Thus we have studied a case study of an industrial firm in CHINA.