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0% found this document useful (0 votes)
66 views54 pagesLabour
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© © All Rights Reserved
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3.1.4 Direct vs Indirect Labour Cost
Direct Labour Indirect Labour
1 Meaning | C2St oF Wages of workers who ate readily identified or Wages of Employees which are not directly
linked with a Cost Centre or Cost Object. allocable to a particular Cost Centre.
2 timkage | TRS can be directly nk Wentiied end allocated to This has to be apportioned to various Cost
| the Cost Unit. Units using suitable basis.
3. Relation | It tends to vary with volume of production, and has a | It may not vary with the level of output/
to Output _| positive relationship with level of output. production.
3.1.2 Objectives of Study of Labour Cost
‘The objectives of the study of Labour Cost are ~
1. To keep the total amount of wages paid to workers at reasonable levels based on industry standards.
2. To motivate workers and harness their energies to increase output, thereby optimizing cost per unit.
3. To contribute to overall organisational profitability and employee-welfare.
3.4.3 Departments involved in Control of Labour Cost
‘The departments involved in the control of labour costs and their areas of responsibility are —
5. Cost
Personnel
‘perform the assigned jobs
To ensure that persons recruited possess the qualifications and qualities necessary to
in an efficent manner, \.e, recruitment, selection, orientation, training, records, ete
‘and Work Study Department: To undertake job analysts, perform time and motion study, to prepare
‘plans and specifications, to supervise production activities, etc.
‘Department: To maintain attendance records of employees and time spent by them on various jobs.
Time-Keeping:
4. Payroll Department: To prepare payroll of the employees and organize Wages / Salary Payments.
To collect, classify and analyse labour
costs over various jobs, products, processes:
‘Accounting
‘and departments and to generate various reports for
a
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3.4.4 Techniques / Factors of Labour Cost Control
1. Assessment of Manpower Requirements. 6. Control over Labour Turnover.
2. Time and Motion Study. 7. Wage and Incentive Systems.
3. Time-Keeping and Time-Booking, 8. Control over Contract, Casual & other workers,
4. Idle Time Analysis and Control. 9, Job Evaluation and Merit Rating.
5. 1
Overtime Analysis and Control. (0, Improvement in Labour Productivity.
3.1.5 Payroll Preparation Procedure
‘The wages payable to workers are computed from the following procedure ~
1, Prepare alist of Employees authorised for employment by the Personnel Department.
2, Reconcile between Clock Cards and list of Employees, to avoid duplication or omission.
3. Determine the hours worked by each Employee as reflected on the Job / Time Cards of each employee. Also 4
the Production Quantity in case of Piece Rate Payment System,
Determine the Hourly Rate of Wages (or Plece Rate Wages), and other Benefits payable to the employees.
Compute the Gross Wages Payable = (Hours Worked x Rate of Wages), etc. (or] (Basic + All Allowances),
Determine the deductions towards PF, ESI, LIC, Society Recoveries, Loan Recoveries, Income Tax TDS, ete.
‘Compute the Net Wages Payable = Gross Wages Less Non-tax and Tax Deductions.
owe
3.1.6 Wag
‘The following procedure may be adopted for the payment of wages ~
1, The Net Wages Payable should be drawn from Bank by way of a self-cheque. Alternatively, the:
from the Main Bank Account to Salary Payable Bank Account from which cash may be drawn or c
Separate covers should be prepared for each worker containing the amount of net wages
3. The Worker's Name and the amount of Net Wages Payable to him should be clearly written
‘made by cheque, the pay cheques may be printed by a computerised system.
4. Payment should be made after proper identification of the worker concerned. |
Personally to each worker. But in certain special circumstances and. under prop
Authorised Representative.
Stamped Receipts should be obtained on the Payroll Sheet or Register against payment
‘AS part of internal check, a responsible person from another department should
Undisbursed Pay Covers / Unclaimed cheques should be kept under the cu
disbursement. If they remain undisbursed for a long time, the reasons thereo
3.1.7 Gross Wages, Deductions and Net Wages Payable
‘Deductions from Gross Wages may comprise the following —
Item
Cone ne ‘he nent deducted hl be remit to the PE
Additional Voluntary Contribution (i
ond remted tthe Pr Autores PE ke
Employee State
Insurance (ESI)
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‘+ The Employer has an obligation to deduct tax at source from Salaries paid, if the Taxable Salary
‘exceeds the Basic Exemption Limit under Income Tax Law.
Income Tax TDS | + Generally, the TDS amount is deducted in monthly instalments.
‘Objectives: The objectives of Assessment of Manpower Requirements are ~
(a) To ensure that the organisation is manned with the right number of personnel, possessing the right qualities, and
recruited at the right time, and
{b) Totrain and develop employees for organisational and individual benefits.
3.2.1 Time and Motion Study / Work Study
1. Meaning: Work Study is @ technique of cost reduction, which seeks to reduce labour cost by reducing unnecessary
movements during the course of work and by determining the standard time to be spent on a job.
2 Procedure:
(2) Observation of workers to record their movements.
() Classification of movements into - (a) Necessary, and (b) Wasteful.
(©) Blimination of wasteful movements and improvisation of necessary movements.
(©) Provision of standard tools and equipment to workers,
(©) Observation of workers and recording time taken for necessary movements.
(Determination of average time required for the job, taking efficiency / rating factor into, account
(G) Determination of Standard time = Average Time + Idle Time Allowance (Contingencies, Rest, ete.)
(b) ‘Addition of incentive margin, if any, to attract efficient workers.
Objectives:
(@) To determine the best way of doing things, by avoiding wasteful movements,
(b) To reduce stress and strain in job performance,
(0) To determine standard time for completion of a job. _
(2) To tay down norms for efficiency and performance evaliation.
(©) To determine fair rate of wages, based on output achievable per day, a
a3
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2.2 Time-Keeping - Meaning and Objectives___
1, Meaning: Time-Keeping means «a record ofthe total time spent by 2 worker inside a factory.
worker enters the fects ot 900 AM bod waves By 6:00 PM, the Comal ime epent by in for 8 Reka
's ascertained from Time-Keeping Records.
2. Objectives of Time Keeping:
(2) Payroll: Employee payrolls are prepared based on of time-keeping records e.g, attendance
(0) Ascertainment & Contro! of Labour Cost: From payrolls, total labour cost can It gaa
assified into Direct and Indirect, in order to facitate contro.
(©) Calculation of overtime: Overtime entitlement of workers Is
excess time over and above regular working Hours.
(@) Calculation of Idle Time: Difference between total time spent (a5 per cn
productive time (as per Time-Booking Records) constitutes Idle Time. it
(©) Disciplinary purposes: Time Keeping constitutes part of organisational proceduress Tile ii
and discipline prevalent in the Firm.
relating to time keeping are required to
(P) Statutory Compliance: Registers and Records t
Laws like Factories AC, etc. This will ensure compliance with statutory Provisions:
(@) Overhead Distribution: Production OH is absorbed over jobs or products using
calculated on the basis of
3.2.3 Methods of Time-Keeping
“The two major methods of timekeeping are ~ (A) Manual (Attendance Register or Metal
(Time Recording Clocks, Dial Time Recorders, Smart Cards, etc). These are described below ==
‘A. MANUAL METHODS rievst tw een Fo
1. Attendance Register: An Attendance Register is kept at the Factory Gate or in each department for workers
therein. This Register shows ~ (a) Name of the worker, (b) his Employee Number, (c) Department, (4)
(€) Time of Departure, and (f) Overtime, if any. The time of arrival of each worker is noted by the Time:
f Advantages: Disadvantages
(2) Simple and Inexpensive. (a) Possibility of dishonest practices by
(0) Useful when number of employees is not large. between workers and time-keeper.
(C) Useful for recording time of workers who work | (b) Inclusion of dummy workers,
at customer's premises, (©) Possibility of mistakes.
(4)_No authentic proof of presence or absence of wo
recorded in the Daily Muster Roll, which is then handed over to the Payroll Department.
Advantages Disadvantages
(2) Simple - even iliterate workers can | (a) Possibity of dishonest practices by workers, eg. removal
‘companions’ tokens, etc,
rege the tokens and put tem
(b) Inclusion of Dummy workers in Muster Rol
(b) Relatively inexpensive, © Puta Fok
(a) _No authentic proof of presence or absence of workers.
Card and puts it in the Time Recording
process of recording time Is adopted for
at the end of the day etc. Late arrivals, early
the management.
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| Cd ri Disadvantages
@ Mee atin reno wey, ve eee (a) Expensive to install Time Recording Clocks.
Possibility ishonest practices, }, ete. (b) Possit
ro) once the tretine, (b) ity of mise. 8 wore recrdng I
Q Fails when the Clock goes out of order.
2 plat Time Recorder: The Dial Time Recorder is 3 machine, which has a dal around the clock, This dal has a numbes
entre and each hole bears @ number, each corresponding tothe dentfication number of workers. There Is one ra
‘arm at the centre of the dial. ‘Upon arrival, the worker presses the radial arm after placing it at the hole of his number.
ar ell be automatically recorded against his number on a roll of paper inside the machine. The paper rl
provides the report on arrival times oF workers during the day.
[ ‘Advantages Disadvantages |
Fa Back te of arrival / departure is recorded {@) Expensive to install ial Time Recorders.
© Possibility of dishonest practices is partly eliminated | (b) Possibility of misuse exists, e.g. a worker recording his
‘since the machine records the time. ‘companion’s attendance.
(©) Useful when number of workers isnot large. (©) Fails when the Recorder goes out of order.
{@) Aral time data can be easiy transcribed into wage | (6) Restricted to a limited number of workers since the
‘sheets for wage computation. maximum number of holes / dials will be around 150.
3 punch Cards / Smart Cards: Ilse lat and stiff paper (card-tke) with notches cut int (r with a magnetic fl in 8)
‘and contains digitally stored information. Upon arrival to or exit from a Department / Factory Gate, the worker swipes
the Cord against a Card Reader, which then records the Employee Number and Time of Arrival / Ext
Note: Advantages and Disadvantages: Same as given above for Time Recording Clocks.
4 iometric Devices / Methods: Biometric Devices use the unique recognition features ofeach individual, which may
be dassified into —
«Physical Traits, e.g. fingerprint, face, DNA, eyes, iris, paim, etc.
‘Behavioural Traits, e.g. voices or rhythm recognition.
[ Advantages Disadvantages
(2) Very useful for sensitive locations, R&D Units, etc. @ Expensive to install Hardware and Software.
(2) Proxy Attendance (called Buddy Punching) is not possible, () Fails when the Systems goes out of order.
5, Time and Attendance Tracking Technology:
(a) This method seeks to replace all the paperwork and manual operations used in time recording.
(b) This technology can be used in two forms ~ (}) web-based, oF (i) PC-based.
© Jrertagesicude — (real time syste, (I) fw cost in case of fay large numberof wakes, (9) easy Gata
corer cose functional purposes e.g, Production Reporting, Variance Analysis, Payrll reparation, cs.
3.2.4 Features of a good Time-Keeping System
‘A good Time-Keeping System should —
Cover al workers regardless of time-based or plece-rte payment to ensure uniformity and dlsciine
Record time of arrival and time of departure of workers clearly,
Preferably be mechanical so as to avoid disputes as to the exact time of anval and departure
Simple, smth and quick to avo unnecessary end ang queues or recording tie atthe factory Pte,
Recon late arvals, early leavings, overtime, et, and promptly report them to management;
ie supervised by a responsible oficial, e.9, Supervisor, 80 a8 to ensure proper operation.
tecon-afetv, Le. cot of operations shoud be within the Frm’ capably, and less than Denes deve therefrom
. te capeble of carting dahonest practices, 9, atendance rearing by proxy, ecardng of wrong oF ery mes of aha
exanvaene
|
FA
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3.2.5 Time-Booking - Meaning and Objectives
1. Meaning: Time-Booking means analysing / charging / booking
2.9. 3 ee ay
{as 4 hours on Job A, 3 hours on Job 8, 1 hour on Job C and
generally based on Time Cards or Job Cards.
2. Objectives of Time-Booking:
@ Cost Ascertainment: Cost ofeach jo can be ascertained from the time spent on I by the workers.
{b) Cost Control: Time Booking ensures thatthe time paid for, is property utitsed on diferent fobs.
(© Idle Time Calculation: between total time spent (as per Time-Keeping Records) and total pr
tire (er Tine Soong Recor) conte de Tne
(@) O# Distribution: POH are absorbed either as a percentage of Direct Labour Cost or a
ita rate per Labour Hour.
3.2.6 Time Cards or Job Cards in Time-Booking
‘Time Booking is done on the basis of information collected in a card called the Time Card or Job Card. This can be oft
_-types ~ (1) Based on Jobs, or (2) Based on Workers.
‘Type 2 - Based on Workers
Particulars ‘Type 1 - Based on Jobs
1. Basis of | A separete Time Card is issued for each job or | A separate Time Card is issued for each
Records | operations thereunder. valid for a day or a week.
2 Basis of | Time spent by all the workers on a single job or | Total Time spent by that Worker on various jo
Entries _| operation, is recorded on the same Card. also idle time, is recorded on the same card.
| Time spent by the worker on any day is found
| 3. Purpose | Cos of the job can be immediately ascertained, as | the same card. So, analysis
|* total time spent on the job is recorded in the Job Card.
Time spent by the worker on any day, may be
scattered over various Job Cards, if he had worked on
4. Recon— |