Professional Documents
Culture Documents
OUT LINE
Introduction
Meaning
Types
of labour Labour cost Control over labour cost Systems of Wage Payment
Time Rate System Piece Rate System Premium and Bonus Plan
INTRODUCTION TO LABOUR
Second major element in cost. Very difficult to reduce. Most perishable commodity and should be effectively utilized. Once lost cannot be recouped. Bonus to increase the cost of production.
MEANING OF LABOUR
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 is the physical or mental effort expended in manufacturing a product. Labour cost is the price paid for using human resources. The compensation paid to employees who engage in production-related activities represents factory labor cost.
TYPES OF LABOUR
Direct labour : Is the labour which is direct involved in the production of goods and services.
Indirect labour : Is the labour which is not directly involved in the production of goods and services
EXAMPLES OF LABOUR
Direct labour: Machine operator, shoe- maker, Carpenter, weaver, Tailor etc. Indirect labour: Supervisors, Watchman, Sweepers, Inspectors, Clears, Peon etc.
LABOUR COST
Labour cost represents the various items expenditure incurred on workers by the employer.
Monetary Benefits Eg: Basic wage, Dearness allowance, Profit bonus etc. Fringe Benefits Eg: Subsidized food, Subsidized house, Holiday plan etc. Fringe benefits are indirect forms of employee compensation.
Labour costs are controlled by the co-ordinated efforts of the following six departments:
Personnel Department. Engineering Department. Rate or Time and Motion Study Department. Time-keeping Department. Pay Role Department. Cost Accounting Department.
ESSENTIAL FEATURES
Fair both to the employer and employee. Assurance of guaranteed minimum wage. Worker should be paid according to their merits. Skilled worker to be paid more as compared to the unskilled worker. Ensure equal pay for equal work. Flexible to allow necessary changes. Minimize labour turn over, absenteeism and late attendance.
Disadvantages Workers may work long hours to earn more wages and spoil their health. Increase in production will reduce the labour cost per unit.
Rowan plan
The bonus hours are calculated as the proportion of the time taken which the time saved bears to the standard time allowed. Proportion of the wages of the time taken which the time saved bear to the standard time allowed.
Time taken* rate + standard time time taken* time taken* rate Standard time