Fundamentals

A human resource that participates in the process of production Essential factor of production Two Categories Direct & Indirect Labour Labour Cost controlled by:
Personnel Department Engineering / Work Study Department Time Keeping Department Payroll Department Cost Accounting Department

 Manpower requirement assessment Time and Motion Study Job Evaluation and Merit Rating Labour Productivity Wage Systems Incentive Systems Time Keeping and Time Booking Labour Turnover Casual and contract workers

Personal Department
This is a service deptt. And is mainly concerned with the proper selection and training of workers and placing them on jobs for which they are best suited.

 Rate of change in the composition of labour force due to retirement, resignation or retrenchment Defined as the number of workers left or replaced or both in relation to the average number of workers Turnover due to personal, avoidable and unavoidable causes Cost of Labour Turnover consists of Preventive Cost and Replacement Cost Preventive Cost personnel administration, medical & health care, welfare measures, wage & retirement benefits Replacement Cost personnel department expenses, training of new workers, initial inefficiency, initial breakages and defectives, time lag in recruitment,

 Measurement by Separation Rate Method, Replacement Rate Method, Flux Method Separation Rate Method: Number of Separations / Average Number of Workers x 100 Replacement Rate Method: Number of Replacements (not normal additions) / Average Number of Workers x 100 Flux Method: (Number of Separations + Replacements) / Average Number of Workers x 100 OR (Number of Separations + Accessions i.e. all Recruitments) / Average Number of Workers x 100

Engineering Deptt.
This department helps in maintaining control over working conditions and production methods for each job, process or department. It performs functions like : Preparation of plans and specifications for each job Conducting time and motion study Making job analysis and setting piece rates Providing safe and efficient working conditions Supervising production activities in various production departments
It includes: Work Study Time and Motion Study Job Analysis Job Evaluation Merit Rating

Statutory attendance record Maintain discipline and punctuality Payroll preparation Ascertain Overtime Ascertain Idle Time Ascertain Labour Cost Provide basis for apportionment Control Labour Cost Maintained using Attendance Register / Muster, Token / Disc Method and Time Clocks / Clock Card

 Records time spent by each worker on various jobs / orders / processes Methods: Daily Time Sheet Weekly Time Sheet Job Card or Job Ticket Time and Job Card Labour Cost Card / Circulating Job Card Piece Work Card

 Overtime Cost:
Customer requested, charged to specific job For increased production, charged to total production Abnormal overtime, charged to Costing P&L Account

Idle Time:
Normal Idle Time, charged to the product Abnormal Idle Time, charged to Costing P&L Account

Casual Workers, charged to specific job or as production overhead based on work done Out-Workers (who do the work in their premises) normally supply based on piece rate Outside Workers (outdoor duty) should be monitored to ensure adequate time booking

 Attendance Bonus are part of wages and treated accordingly Shift Premium, charged same as Overtime Cost Fringe Benefits are part of wages and treated accordingly Apprentice Wages, charged as production overhead Holiday / Vacation Pay, charged as overhead or accounted in an inflated rate Leave with pay, accounted in an inflated rate Employers contribution to employee insurance, charged as production overhead

 Premium Bonus Plan - Halsey Plan, Halsey Weir Plan, Rowan Plan, Barth Plan Differential Piece Work - Taylor System, Merrick System Combination of Time and Piece Work Emersons Efficiency Plan, Gantt Task and Bonus Plan, Points Scheme (Bedeaux Plan, Haynes Plan), Accelerated Premium Plan Group Incentive Plans Priestmans Production Bonus, Rucker Plan, Scalon Plan, Towne Gain Sharing Plan, Budgeted Expenses Bonus Incentives for Indirect Workers Profit Sharing Co-Partnership

 Halsey Plan: standard time fixed for each work, guarantees hourly wages for actual time taken, bonus of 50% paid if time saved Earnings = Time Rate Wages + Bonus = Actual Time Taken x Time Rate + 50% (Time Saved x Time Rate) Halsey Weir Plan: same as Halsey Plan except bonus is 33% compared to 50% in Halsey Plan Rowan Plan: same as Halsey Plan except bonus is a proportion (Time Saved / Time Allowed) x Actual Time Taken x Time Rate Barth Plan: Designed for trainees, beginners and slow workers. Earnings = Time Rate x (Standard Hours x Time Taken)

 Lower and higher production rates are defined Taylors System:

Merricks System:

Production < standard output: Earnings are 80% of normal Production = or > standard output: Earnings are 120% of normal Production < 83% of standard output: Earnings are 100% of normal rate Production > 83% and < 100% of standard output: Earnings are 110% of normal rate Production > 100% of standard output: Earnings are 120% of normal rate

 Emersons Efficiency System:

Up to 66% efficiency, nil bonus More than 66% and < 100% efficiency, bonus on step basis (32 bonus steps defined) More than 100% efficiency, bonus @ 20% of basic wages + additional bonus @ 1% for each 1% increase in efficiency

Gantt Task and Bonus System:

Less than standard output, no bonus At standard output, 120% of time rate More than standard output, 120% of piece

 Bedeaux System or Points Scheme:

Points awarded for each unit of production Up to standard time, no bonus If time saved, bonus of time saved is given 75% to worker and 25% to foreman

Haynes System
Job expressed in standard man-minutes For repetitive work, time saved is shared between worker and foreman in 5:1 ratio For non-repetitive work, time saved is shared between worker, employer and foreman in 5:4:1 ratio

Accelerated Premium System

Bonus rate increases with output

 Priestmans Production Bonus:

Bonus paid in proportion to production in excess of standard output per week

Rucker Plan
Also known as Cost Saving Sharing Plan Bonus = fixed proportion of value added (sales purchased materials & services) of the monthly bonus is paid out, balance transferred to reserve fund

Scalon Plan
Similar to Rucker Plan except that bonus is linked to ratio of direct labour cost to sales value

 Towne Gain Sharing Plan

Bonus calculated as 50% of direct labour hours saved

Budgeted Expenses Bonus

Bonus determined as a fixed percentage of savings in actual expenses over the budgeted expenses

 For expense and service cost centers Creates goodwill, fosters teamwork and increases efficiency Measuring or relating indirect work to production is difficult Establish standards for measurable and repetitive activities Generally clubbed under group incentive plans Two Types: Monetary & Non-Monetary

 Based on overall business prosperity and is over and above other benefits Types: Cash Plan, Deferred Credit Plan, Combined Plan Minimum bonus for eligible workers determined under Payment of Bonus Act Discretionary bonus for all determined by the management Paid on a flat percentage or on slab rates