LABOUR, LABOUR COST, TYPES OF LABOUR AND

LABOUR TURNOVER

INTRODUCTION

Contract labour or Employment, a relationship between an employer and an

employee
Manual labour, physical work done by people
Wage labour, delivery of services by person for payment
Bonded labour, a system of unfree labour where a person must work to pay off a
debt
Child labour, the employment of children under an age determined by law or
custom
Labour Day, a national holiday in many countries
Labour economics, the functioning and dynamics of the markets for labour
Labour force, the people of a country or other geographic entity actively
employed or seeking employment
Labour/Le Travail, an academic journal focusing on the Canadian labour
movement
Labour movement, the development of a collective organisation of working
people
Labour pool or Workforce, the people working in a company, industry, nation or
other group
Labour relations, the study of the relationship between management and workers
Labour union or Trade union, an association of wage-earners meant to maintain or
improve conditions of employment
Unfree labour, work relations in which people are employed against their will

LABOUR

Physical or mental exertion, especially when difficult or exhausting. It is a specific

task or effort, especially a painful or arduous on. It is a particular form of work or method of
working

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LABOUR COST

Labour cost plays a prominent role in small-business operations. Business owners

often hire employees to complete various business functions. Management accounting
provides business owners with a specific analysis of labour cost. Each type of business labour
is broken down into groups for cost-accounting purposes. Business owners use cost
accounting to allocate labour cost to the goods or services produced by the company.

TYPES OF LABOUR

Four types of labour cost are commonly found in the business environment. They are:

1. Variable Labour
2. Fixed Labour
3. Direct Labour
4. Indirect Labour

VARIABLE LABOUR

Variable labour cost fluctuates based on the amount of production output. Hourly
employees are the most common type of variable labour. Many types of small businesses use
hourly employees. Retail stores, restaurants, manufacturers and repair companies are
traditional examples of businesses that rely on variable labour. Business owners can hire
hourly employees directly or use a temporary employment agency to increase variable labour
employees. Small businesses often use variable labour to ensure that business costs do not
exceed estimated revenues. Business owners do not usually guarantee hours to these
individuals, to save money when sales and production output decrease.

FIXED LABOUR

Fixed labour cost remains the same regardless of the company’s production
output. Owners, directors, managers and supervisors are the common types of fixed labour in
small business. These individuals usually earn a fixed salary regardless of the hours worked
in the business.

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 Business owners used fixed salaries to avoid paying managers and supervisors
overtime during business operations. Managers and supervisors usually work more hours than
regular employees and provide more benefits to small businesses. Fixed labour costs can be
difficult to lower without compromising the effectiveness or efficiency of business
operations.

DIRECT LABOUR

Basic management accounting principles separate variable and fixed labour costs into
one of two groups: direct and indirect. Direct labour includes all individuals responsible for
producing a company consumer goods or services. Examples include assembly line workers,
production supervisors, delivery truck drivers and quality control inspectors. Direct labour is
an important concept because these costs are allocated to each good or service produced by
the company. Business owners typically manage direct labour through the use of specific
time clock codes that can be directly traced to individual production departments.

INDIRECT LABOUR

Indirect labour includes the cost for all employees working in the general or
administrative positions in a company. Examples include office supervisors, accountants,
salesmen, maintenance personnel and administrative assistants. These individuals provide
ancillary services to the company production process. Indirect labour also adds to the indirect
manufacturing overhead of the company. This labour cost is not allocated to the company
consumer goods or services. Business owners must pay for this labour through gross profits
from product sales.

LABOUR TURNOVER

If an employer is said to have a high turnover rate relative to its competitors, it means
that employees of that company have a shorter average tenure than those of other companies
in the same industry. High turnover may be harmful to a company's productivity if skilled
workers are often leaving and the worker population contains a high percentage of novices.
Companies will often track turnover internally across departments, divisions, or other
demographic groups, such as turnover of women versus men.

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 Most companies allow managers to terminate employees at any time, for any reason,
or for no reason at all, even if the employee is in good standing. Additionally, companies
track voluntary turnover more accurately by presenting parting employees with surveys, thus
identifying specific reasons as to why they may be choosing to resign. Many organizations
have discovered that turnover is reduced significantly when issues affecting employees are
addressed immediately and professionally. Companies try to reduce employee turnover rates
by offering benefits such as paid sick days, paid holidays and flexible schedules.

In the United States, the average total of non-farm seasonally adjusted monthly
turnover was 3.3% for the period from December, 2000 to November, 2008. However, rates
vary widely when compared over different periods of time and with different job sectors. For
example, during the 2001-2006 period, the annual turnover rate for all industry sectors
averaged 39.6% prior to seasonal adjustments, while the Leisure and Hospitality sector
experienced an average annual rate of 74.6% during this same period

LABOUR TURNOVER DEFINITION

The ratio of the number of employees that leave a company through attrition,
dismissal, or resignation during a period to the number of employees on payroll during the
same period.

LABOUR TURNOVER TYPES

There are four types of turnovers: They are

1. Voluntary
2. Involuntary
3. Functional,
4. Dysfunctional

Voluntary is the first type of turnover, which occurs when an employee voluntarily
chooses to resign from the organization. Voluntary turnover could be the result of a more
appealing job offer, staff conflict, or lack of advancement opportunities. The second type of
turnover is Involuntary, which occurs when the employer makes the decision to discharge an
employee and the employee unwillingly leaves his or her position.

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 Involuntary turnover could be a result of poor performance, staff conflict, the at-will
employment clause, etc. The third type of turnover is Functional, which occurs when a low-
performing employee leaves the organization. Functional turnover reduces the amount of
paperwork that a company must file in order to rid itself of a low-performing employee.
Rather than having to go through the potentially difficult process of proving that an employee
is inadequate, the company simply respects his or her own decision to leave.

The fourth type of turnover is Dysfunctional, which occurs when a high-performing

employee leaves the organization. Dysfunctional turnover can be potentially costly to an
organization, and could be the result of a more appealing job offer or lack of opportunities in
career advancement. Too much turnover is not only costly, but it can also give an
organization a bad reputation. However, there is also good turnover, which occurs when an
organization finds a better fit with a new employee in a certain position. Good turnover can
also transpire when an employee has outgrown opportunities within a certain organization
and must move forward with his or her career in a new organization

CONCLUSION

In human resources context, turnover is the act of replacing an employee with a new
employee. Partings between organizations and employees may consist of termination,
retirement, death, interagency transfers, and resignations. An organizations turnover is
measured as a percentage rate, which is referred to as its turnover rate. Turnover rate is the
percentage of employees in a workforce that leave during a certain period of time.
Organizations and industries as a whole measure their turnover rate during a fiscal or
calendar year.

REFERENCES

https://en.wikipedia.org/wiki/Labour
http://www.thefreedictionary.com/labour
http://smallbusiness.chron.com/examples-labour-cost-2168.html
http://accountlearning.blogspot.in/2010/05/types-of-labour-cost.html
https://en.wikipedia.org/wiki/Turnover_%28employment%29
http://www.businessdictionary.com/definition/labour-turnover.html