M. Com.

Paper I a Advanced Cost Accoun '

Idle Time, Over Time etc.

idle Time : When workers are paid on time basis, there is usually difference
between the time for which they are paid and the time the actually spend on
production or work. Thus, idle time is that time fr which an employer pays wages
but the employer does not get attjp. production or service from the employees. In
other words, it means this time for which a worker is paid for no work.
Factors responsible for idle time can be grouped as under :

(a) Productive Cause : e.g. 'machine breakdown, power failure, waiting for work
because of non-scheduling or planning of work^ properly, lack of materials, tools,
lack of drawings, instructions etc.

(b) Administrative Causes : e.g. overexpansion of production facilities in excess of

actual requirements, strikes, lockouts, non-retrenchment of workers, and underutilisation of machinery during depression, fire etc.

(c) Economic Causes : e.g. seasonal market fluctuations, intensity of competition

etc.
Idle-time may be normal or abnormalr Wastage of time in the routine course
of manufacture and which is unavoidable is treated as normal idle-time e.g. time
taken by worker to and from the gate of the factor}', from and to the place of his
work, time taken for change over from one job to another, tea-breaks, personal
needs etc., time spent in the setting of the machine, adjusting the tools etc.
However, an attempt should be made to keep the idle-time to the minimum.
Idle time due to productive and administrative causes stated above is treated
as abnormal idle time. This idle time can be avoided if sufficient care is taken. For
this purpose attention must be given to timely and proper maintenance of
machineries and tools, proper store control, ensure supply of required materials in
time, in sufficient quantity and of standard quality by stores department. For this
purpose there must be proper co-ordination between purchase department and
stores department.
Treatment of Normal Idle Time

Normal idle-time can be dealt with in any of the two ways stated below :
(a) By inflating the wage rate so that allowance can be made for this loss of
time e.g. if time required for a job is eight hours including idle-time of half an
hour and time rate is Re. One per hour, the inflated rate will be 8 T y =1.07. If the
idle time occurs en a specific job and the job is on the contract or special order
basis, cost of idle time may be charged against such job or order as direct labour
cost.
(b) The cost of normal idle-time is treated as a factory overhead. If such cost
can be allocated to a particular department, it should be charged to the
department over-head and absorbed in the production cost of that particular
department.
Treatment of Abnormal Idle Time

The cost of such idle time should be excluded from cost accounts and should
be charged to Costing Profit and Loss Account. It is principle of costing that all
abnormal expenses and losses should not be included in costs to have meaningful
comparison of cost of production at different times and of different producers.
These are avoidable expenses and as such the organisation which controls such
abnormal expenses and does the production with the minimum wastage of
material, labour and other expenses, produces the products at the lowest possible
cost. Therefore, it is not a wise policy to include avoidable expenses in cost of
productions and thus increase the cost. In order to compare efficiency in
production, it is not proper to include abnormal expenses in the cost of
production.
Control of Idle Time : Production should be planned and supervised so that
idle time is reduced to minimum. Planning of work should be done to see that no
worker is required to wait for getting the work. The flow of work should be
smooth and continuous. The instructions and drawings should be clearly laid

Accounting and Control of Labour Cost

down so that workers are not required to wait for instructions. Timely supply of
material and proper maintenance of plants and machinery, as also of power plant
ensures reduction in idle time. Daily or weekly idle time reports should be
submitted to the works manager to enable him to know the causes and take timely
corrective actions.
Over-time : Working hours of workers per day are fixed. However,
sometimes the workers are required to work for more hours than the hours fixed.
The work, thus put in for extra hours over the usual hours fixed, is termed as
over-time work. The rate for over-time is higher than normal time rate, generally,
it is double than that of normal time rate. As such it is likely that the workers may
incline to do overtime work,, avoiding regular work to be done during the normal
rime. Hence, it is necessary to keep strict control over the over-time work and it
should be allowed only in exceptional cases and it should be normally discouraged.
Over-time not only increases wages, but other expenses like, lighting, cost of
supervision, wear and tear of machinery etc., also increase disproportionately.
During over-time, the workers cannot work with their usual efficiency as fatigue
prevents the workers from doing the-work at their efficiency. As a result, job done
in overtime costs more as compared to the jobs done during the normal hours.
However, overtime

174

M. Com. Paper I Advanced Cost Accounting

cannot be totally avoided because under certain circumstances, such as rush of

work, breakdown of machinery, power failure etc., overtime is required is to be
done. Occasional overtime is, however, a healthy sign because it shows that factory
has employed the reasonable number of workers and they are not idle. If it is
found that overtime is required to be done regularly, serious thought must be
given to the appointment of permanent staff. The works manager or some other
high officer should authorise overtime and list of the workers required off and on
for late work to cope up with the production schedule should be prepared by the
foreman and Submitted to the works manager for approval.
The -treatment of over-time wages depends upon the merit of the particular
case as shown below :

(a) When the over-time is required to be done on insistence of customers for earlywork and the customers agree to bear the overtime charge entirely, it should be
charged to that particular job or work order as direct cost.

(b) When

the over-time work is required to be done due to any fault of

management or any unexpected development or any abnormal conditions like
flood etc., overtime cost should be charged to Costing Profit and Loss Account.

(c) When over-time is caused due to seasonal pressure, its cost should be treated
either as general overhead or as deferred expenditure for absorption equitably
over the entire production.
Control Over the Overtime Work

It is necessary to control overtime work, especially, the overtime caused due

to abnormal causes. The following steps may be taken in this regard.

(a) It should be ensured that the workers do their job efficiently during the
normal working hours and as far as possible the work assigned is completed
during the normal working hours.
(b) A statement of overtime work should be prepared giving the reasons for
overtime. Sanction for overtime should be obtained in advance from the competent
authority.
(c) Actual rate of output 'per hour achieved during the overtime period and
normal rate of output per hour should be compared to ensure that rate of output
has not decreased during the overtime period.
(d) Monthly or Quarterly Overtime Report should be prepared and
submitted to the top management to ascertain whether the overtime is justified,
and if not, necessary steps to be taken to eliminate it, or at-least to keep it to the
minimum possible extent.

Holiday Pay and Leave Pay

For the weekly holidays and other compulsory holidays under the Act, the
workers are paid wages. Similarly, workers are entitled to various types of leave
such as medical leave, earned leave, causal leave etc. either with full-pay or halfpay as the case may be. Thus, it is a payment for the days on which no work is
done by workers concerned.
There are three methods of treatment of this cost.

1.

Wages are charged to cost as and when incurred and actual expenditure of
every month is apportioned over the production of that month either separately as
a percentage of direct labour cost or as a part of general overheads. Even
distribution of leave and holidays is an essential factor for this system, otherwise
there will be disparity in the cost of production per unit from month to month.

2. Wages are charged to production through annual reserve calculated at a

percentage of total wage bill. This system is more practicable and can be applied
under any set of circumstances. The system provides for uniform and equitable
distribution of the expenditure over the production of the whole year irrespective
of charges to the extent of expenditure actually incurred from month to month.
3. Under this method it is treated as a direct element of cost and charged
straight to the jobs or products.
Labour Turnover

In every concern, some workers leave their job for some reason or the other
and some new workers are appointed. This change in labour force is termed as
Labour Turnover. Thus, the labour turnover is the ratio of the average change to
the average strength of the labour force during a particular period. The extent of
labour turnover varies according to industry, structure of employment in the
country, physical conditions in a particular organisation, proportion of male and
female workers.
Effect of Labour Turnover

Normal labour turnover is unavoidable and it is not a matter of iety for the
management. But a high labour turnover is detrimental to organisation. It results
into low productivity and increased cost of uction. The new workers are required
to be trained and they take e to become proficient in their jobs. This results in
reduction of action and increase in the cost of production. As the new workers not
conversant with their jobs, time and material are wasted and Ity handling of
machinery and tools results in stoppage of work. This the flow of work. Accidents
are likely to be increased. Money j?S spent on the training of workers leaving the
job are wasted.
176

M. Com. Paper I Advanced Cost Accounting

Reduction of Labour Turnover

In order to avoid high labour turnover the management should be very
careful in selecting the workers. The policy 'right man for right job' should
be followed. The workers should be given fair and equal, treatment, fair
remuneration, good working conditions, cordial relationship between
management and workers, provision of nonmonetary benefits, educational
and accommodation facilities, healthy atmosphere etc. Effective
communication throughout the business firm will help to control the high
rate of labour turnover. In short, it is necessary to create a feeling in the
minds of the workers that the organisation belongs to them; and if they
safeguard the interest of their organisation, their interest, in turn, is
safeguarded. Management must motivate the workers. Motivated employees
stay in the organisation and they do not entertain the thought of leaving the
organisation.
Cost of Labour Turnover
The cost of labour turnover is the monetary value of the loss of output
and cost of services involved in dealing with labour turnover and labour
replacement. It is classified as :
1. Preventive &osts, and

Accounting and Control of Labour Cost

- 2. Replacement Costs.
1. Preventive Costs : These costs include all those costs which are
incurred to keep the workers satisfied so that they are prevented from
leaving the organisation. The expenses incurred in respect of the
following items fall under this category :

(a) Provision of safety measures to avoid accidents.

(b) Maintenance of good relationship between management and
workers, and between workers and workers.

(c) Welfare Measures : These measures include provision of medical

benefits to the workers and their families, facilities like sport, education to
the children, transport, housing, canteens, co-operative stores etc.
(d) Wage and Retirement Benefit : These include attractive wage rates,
provisions for pension, provident fund, gratuity, bonus, incentive schemes etc.
(e) Selection and training on scientific basis.
2. Replacement Costs : These costs arise from replacement of
workers who left the organisation.
(a) Recruitment : Cost of advertisement, selection, training of candidates
etc.

Accounting and Control of Labour Cost

177

(b) Inefficiency : New recruits are not conversant with the work assigned
tr_them and as a result production is affected. Further, losses arise from higher
spoilage of materials, outputs.and time.
f

{c) Mishandling of Machines and Tools : Due to mishandling of machines

frequent breakdowns of machines occur, resulting in stoppage of work.
(d) Increase in Overhead Costs : Wastage, spoilage, production of inferior
goods etc. result in increase in overhead costs.
Methods of Determining the Costs of Labour Turnover
The following methods are adopted to determine the costs of labour turnover :
(1) Separation and Replacement method, (2) Profit foregone method.

1. Separation

and Replacement Method : The specific cost applicable to

separate and their replacements are accumulated. Separation costs include
severance pay, gratuity and other social security benefits. On replacement, a
company has to incur the costs on (i) recruitment, (ii) selection and training.

2. Profit Foregone Method : The actual profit for the period is compared with
the estimated profit that would have been obtained had no labour turnover
occurred. The difference between the-actual profit and estimated profit is, thus,
treated as lost profit due to labour turnover.
LABOUR TURNOVER REPQRT
Date :................... .

Month

Cumulative'since
the year

Last year beginning of

Avoidable Reasons

Total Percentage

:________________________________________________________

Unavoidable Reasons

Total Percentage

:_____;____________________________

Total number of_______________________________,_________________:___________

Replacement Percentages Average
Labour Force
Prepared by
M. Com. Adv. Cost A/cing (P.U.)...12

178

M. Com. Paper I m Advanced Cost Accounting

For the purpose of control of labour cost, labour turnover report occupies
an important place among other labour reports. The report should analyse the
causes as controllable and uncontrollable. It should show the current as well as
last month's (or year's) labour turnover positions. Sometimes an analysis is
made under different categories such as men, women old and new skilled and
unskilled Workers.
Treatment of Labour Turnover Cost
Labour turnover cost are usually treated as factory overhead. The preventive
costs should be distributed among different departments on the basis of workers
in each department. The replacement costs are to be ' Shared by the
departments affected by the labour turnover on the basis of number of workers
replaced.
Control Over Labour Costs
Next to material, labour is the other significant element of cost. Therefore,
proper recording of time and collection of cost data are prerequisites of any
system of labour cost control. Labour costs may be excessively high due to
following reasons :

1. Inefficient Labour,
2.
Tendency on the part of workers to avoid the work, to do the
work carelessly and lack of supervision over the working of the
workers.

3. Wastage of material by workers.

4. Idle time and unusual over-time work.
5. High labour turnover.
6. Inclusion of dummy workers in the pay roll.
The primary concern of the management, therefore, is to select the proper
persons, give them training and to utilise the labour as economically as possible,
so that not only the production is increased and production cost is minimised,
but the labour force is suitably rewarded, for increased efficiency.
Management is interested in the accumulation and analysis of labour ' costs
for the following purposes :
(a) To use direct labour cost as a basis for increasing the efficiency ; '
of workers.
(b)To identify direct labour cost with product, job or process for ascertaining
the cost of production as accurately as possible. < (G) To use direct labour
cost as a basis for adsorption of overhead, if ^-.V desired.
gv(A)To use direct labour as basis for comparison with past labour ws swt

and for substitution purposes, and

anting and Control of Labour Cost

179

(e) To determine-the amount of indirect labour cost to be treated as .overhead.

The management has; therefore, to device a proper system of labour t control.
The techniques used for the effective control of labour costs luded :
(i) Production Planning.
(ii) Use of labour budgets and labour standards. Actual performance
compared with predetermined standards to enable management to take
rrective steps.
(iii) Labour performance reports.
(iv) Suitable
system
of
wage
payment
coupled
ncentive schemes so that the production is increased to
xtent resulting in reduction in cost of labour pelhunit of production.
abour Cost Rates

with
various
the maximum

Accounting and Control of Labour Cost

Labour cost includes basic wages, dearness allowance,-..employer's contribution'to

provident fund, contribution to EmployeSs^State Insurance, production bonus, holiday
pay and other allowances like city allowance, special allowance, house rent allowance
etc. such expenses. When wages including these expenses are divided by effective hours
worked, we get the labour cost per hour and a job should be charged with the amount
which is arrived at by multiplying the hours worked with such a figure.
Illustration 2 : The management of In and Out Ltd. are worried about their increasing labour turnover in the
factory and before analysing the causes and taking remedial steps, they want to have an idea of the profit foregone
as a result of labour turnover in the last year.
Last year sales amounted to Rs. 83,03,300 and the P/V ratio was 20 per cent. The total number of actual
hours worked by the direct labour force was 4.45 lakhs. As a result of the delays by the Personnel Department in
filling vacancies due to labour turnover, 1,00,000 potentially productive hours were lost. The actual direct labour
hours included 30,000 hours attributable to training new recruits out of which half of the hours were
unproductive .
The costs incurred consequent on labour turnover revealed on analysis the fallowing :
Settlement Cost due to leaving

Rs. 43,820

Recruitment Costs

Rs. 26,740

Selection Costs

Rs. 12,750

Training Costs.

Rs. 30,490

Assuming that the potential production lost as a consequence of Labour urnover could have been spld at prevailing
prices, find out the proiit foregone year on account of labour turnover

M. Com. Paper I Advanced Cost Accountin

The normal working hours for a month are 200. Overtime is paid for at double
the normal wage plus D. A. Employer's contributions to E.S.I. and P.F. are at equal rate
of that of employee. The month contains 25 working days and one paid holiday.
The two workers were employed on jobs in the following proportion :

A
B

40

30

30

50

20

30

Overtime was done on job Y.

(Aits.: Earnings A Rs. 175 (including Overtime) B Rs.
165 (including idle lime)
Labour cost per job : X = Rs. 139.90, Y = Rs. 93.36 & 2 - Rs. 93.54.) 2. Calculate the
normal and overtime wages payable to a workman from the following data.
Hours worked
Monday

Tuesday

10

Wednesday

Thursday

11 *

Friday

Saturday

Normal working hours a day

Normal Rate Rs. 0.50 per hour Overtime ~ upto 9 hrs. a day at single rate
and over 9 hrs. at double rate
OR
Upto 48 hrs. in a week single rate and over 48 hrs. at double rate, whichever is
more beneficial to a worker.
(Ans.: Rs. 27 in both the cases.)

JOB

8
EVALUATIO
N & MERIT
RATING
JOB EVALUATION

Job evaluation represents the assessment of the nature and volume of

work that a job involves. Each organisation has to carry out different types of
jobs. They require different types of knowledge and expertise to perform them.
Job evaluation is useful not only in deputing the right type of men to carry out
every operation but also to determine the labour time and cost it is likely to
incur for completion.Job evaluation may be defined as the rating of various jobs according to
the responsibility and skill required for them. The important principle behind
job evaluation is that jobs which are similar in duties and responsibilities must
carry same wages.
Job evaluation is an orderly and systematic process of determining the
wages (worth) for the job in relation to other jobs. It is a process of rewarding
the job after it has been analysed. Each should be paid (or priced) according to
its real value i.e. a high value job should receive higher wages and low value job
should receive lower wages. Job evaluation seeks to provide for a fair and
equitable wage structure based on the assumption that each job should be paid
according to its worth.
Definitions
According to Filppo, "Job evaluation is a systematic and orderly process
of determining the worth of a job in relation to other jobs"
According to Kimball and Kimball "Job evaluation represents an effort to
determine the relative value of every job in plant to determine what the fair
basic wage for such a job should be". Wendell French says "Job evaluation is a
process of determining the relative worth of the various jobs within the
organisation, so that differential wages may be paid to jobs of different worth.
According to the British Institute of Management, "Job evaluation is the
process and analysis and assessment of job to ascertain reliably their relative
importance using the assessment as a basis for balanced wage structure."
Thus, the job evaluation is an orderly process of determining the

186

M. Com. Paper I 11 Advanced Cost Accounting

fair wages for an individual job taking into account some common factors such
as skill, responsibility, effort, working conditions etc.
Job evaluation is the rating of job and not the man doing the job.
Prerequisite of Job-evaluation Programme
The following points should be considered before starting job evaluation
programme :

1. Jobs must be thoroughly examined and clear cut job descriptions and
job specifications must be available for selecting factors to be evaluated for jobevaluation purpose.
2. Comparison of jobs should be made to decide the grades and to arrange
them in order of their worth.
3. Jobs should be classified as hourly paid jobs and salaried jobs.

4. All workers who are going to affect with the job evaluation plan should
be allowed to participate in the plan. The plan should be explained to the
concerned employees.

5. Each element of the job, such as responsibility, skill, effort, working

condition etc. should be evaluated separately.
6. Supervisors should be given training in advance about job evaluation
methods, and they should be convinced of the job evaluation programme.
7. Fix salary or wage to be paid according to the total number of points
and other factors governing wages.
8. Note the prevailing working conditions.
9. Identify the personal demands which a job makes on an individual.
Principles of Job Evaluation
Job evaluation is an art and not an exact science. As such, no rigid and set
principles can be laid down. However, following are the general principles which
should be followed :

1. Rating of the job should be done rather than the rating of man doing
the job.

2. The factors selected for evaluation of job should be skill, effort,

responsibility and working conditions. In addition to these, any other factors are
considered to be necessary they may be studied. However, the number of factors
should be small. Each factor should be precisely defined.
3. Since the job evaluation is executed by the mutual co-operation of
management and workers, the plan must be acceptable to all the employees
involved.
4. The value or weightage given to each of the factors of the job while
evaluating should not be disclosed to the foreman or supervisor.
1. Conclusions and final appraisal of jobs should not be formalized until
the judgement of different raters agree.
5. The factors such as the size and type of organisation must be
thoroughly considered before a job evaluation process is set up.
6. The use of different forms in job evaluation process shall be made only
when the different terms utilised by these forms have been completed and
explained before the work actually starts.
7. The objectives of job evaluation process may be determined and
explained to all the parties likely to be affected by the programme.
8. In the initial stages of installation of job evaluation programme, shortterm, over payments may be made so as to foster employee's faith in the system
and minimize the chances of labour problems.
10.The level of wage rates for the jobs to be evaluated must be in
conformity with the jobs prevailing in the company and in the industry.
11. The foreman of the concerned department should participate in the
job evaluation.
Objectives of Job-evaluation
1. The main objective of job-evaluation is to have consistency in
wages structure. Jobs which are similar in duties and responsibilities
must carry same salaries. It is a logical plan for job grading as well as
for their mutual comparison.
2. To avoid disputes arising out of inconsistency in wages.
3. To fix maximum
organisation for each position.

and

minimum

wages

throughout

the

To introduce standardisation in wage differentials.

Selection of proper persons.
Advantages of Job Evaluation

Job evaluation is the basis of scientific system of job rating as well as

developing a sound and satisfactory wage structure. There is a common saying
that "we pay for job and not for men". Job evaluation seeks to provide for a fair
and equitable wage structure based on the assumption that each job should be
paid according to its contribution to the value of the finished product and to the
long-term success and progress of the organisation.
The main advantages of job evaluation are as follows :
1. Helpful in removing inconsistencies in Wage Structure : "Equal pay for
equal job" is the principle. Hence, it helps in avoiding the disparities in wages.
The workers get no chance to have a dispute on this point.

188

M. Com. Paper I Advanced Cost Accounting

2. Good Industrial Relations : Generally the main cause of labour unrest

is wages. Job evaluation brings uniformity and justice in wage rates. It
provides such wage-rates which are easily acceptable to the employees. Any
dispute relating to wages can be easily settled by referring it to the job
evaluation committee.

3. Helpful in wage administration : Good wage payment plans, well

administered, have a salutary effect on the entire industrial organisation.
Employees are happier in their work, morale is higher, output is up and quality
of production is better. With technological changes, job contents also change.
Job evaluation reviews the job rates.
4. Pricing of New Jobs : Wages for new jobs can be settled.

5. Various Uses of Job information : For job evaluation the work of job
analysis is done and job descriptions are prepared. Hence, the informations
collected at that time are useful for the comparative studies of jobs, selection,
transfer and promotions.
6. It provides a sound base for bonus schemes and helps in job
classification and work simplification.
Limitations of Job Evaluation

Though the job analysis has many advantages, the management should not
place too much reliance on it as it has certain limitations and the management
must bear in mind these limitations while making use of job analysis. These
limitations are :

1. Though it is considered to be a scientific method, actually it is not so,

because all the factors cannot be measured accurately and some of them are
based on judgement.
2. Factors

applied, though presumed to be independent, overlap each

other.

3. Jobs of equal contents are not equally attractive to the employees as is

presumed under the system. There are other factors and the employees prefer
one to the other. Naturally wage, rates cannot be maintained equal for both the
jobs of equal contents.
4. It introduces inflexibility in wage structure. It does not place the right
deal of emphasis on the wage rates in the industry as a whole. The demand and
supply of labour is responsible for wage differentials to a great extent.
5. As it is time consuming and costly, it cannot be made use of by small
concerns.
6. It limits <the right of the trade unions to negotiate with the
management in respect of fixations of wages.

7. Though it is pleaded that the wages are fixed accurately considering the
worth of the job and not of the job holder, it is not so as much has to be
done afterwards for eliminating wages controversies.

1. If foremen and operative employees are not explained properly to make

them understand the scheme, it cannot work satisfactorily and the purpose will
be defeated.
8. Workers insist that Home more factors, such as supervision received,
amount of over time, incentive plans etc. shov-'d be considered in addition to
skill, responsibility, effort and working condition.
Methods of Job Evaluation

There are four widely used methods :

A. Non-Quantitative Methods or Qualitative Methods

1. Ranking or Job Comparison Method

2. Job Classification (or Job Grading) Method
B. Quantitative Methods

1. Point Method (Or Manual System)

2. Factor Comparison Method.
A. Non-Quantitative Methods or Qualitative Methods

1. Job Ranking Method : Rank means 'to arrange according to classes,

Under this method all jobs in an organisation are ranked in the .. order of their
importance or economic worth to an organisation. For the purpose, a
committee comprising of certain executives is formed. The committee evaluates
the job descriptions. Under this method, specific factors are not considered, but
the committee does keep in mind certain factors e.g. type of work,
responsibilities involved, working conditions and supervision required. No
weight or points are specified for these factors.
The following steps are involved in this system :

(a) Preparation of Job Description : It is' better to prepare a job

description so that different persons may not give different rankings when the
job evaluation work is entrusted to more than one person.
(b) Selection of rates and Key Jobs .-First of all, certain key jobs of major
departments are rated. These rates can be associated with those jobs in the
rank, order. Then the rates of pay for the other jobs can be interpolated
between the rates for the key jobs.
(c) Job Classification : Job classification is prepared on the basis of
ranking. The wages paid for all jobs falling in one class will be same.
(d) Suitability : This method is suitable in case of small concerns as the job
rater can measure each job in comparison with other jobs without experiencing
any difficulty.

190

M. Com. Paper I Advanced Cost Accounting

Merits of the Method

(a) It is very simple to understand.

(b) It is cheap as compared to other mothods.
(c) Workers understand the process without any difficulty and the
rates are fully familiar with the job. As a result it can be applied without
any delay.
Demerits

(a) It

fails to tell the objective difference between different jobs as various

factors affecting jobs are not separately considered.

(b) Much subjective judgement is required to determine the relative position of

jobs in the rank order.
(c) There is no pre-determined yardstick for judges to use.

(d) Judgement is needed in determining what the pay rates, should be and hence
wages already being paid on the jobs will affect the job evaluation.

(e) If the job descriptions are not accurate, serious errors in ranking can occur.
The arbitrary ranking of jobs will be resented by employees.
Due to the a^ove defects, this method is not in use at present.
2. Job Classification or Job Grading Method : This method provides a
yardstick in the form of job classes or grades. The committee goes through the
job descriptions of each job and assigns it a particular grade. Jobs are measured
as a whole job. There are different rates of wages for different classes. The jobs
may be graded as skilled, unskilled, routine, administrative etc. The steps
involved are as under :

(a) Preparation of job descriptions.

(b) Preparation of grade descriptions or job classes.
(c) Selection of key jobs.
(d) Assigning a grade to key jobs.
(e) All jobs are classified by the pre-determined grades.
The accuracy of the results will mainly depend on the correctness of the
definitions of the job grades.
Merits

(a) It is very simple to operate.

(b) It provides yardstick consisting of job classes or grades.
(c) It is inexpensive to operate.
(d) It requires less time.
(e) It is suitable to small concerns.
Demerits

(a) As it is difficult to write precisely grade descriptions, broad generalities

are used in defining grades.

(a) It requires multiple systems for different types of jobs.

(b) Since judgement is used for all jobs, it may prove to be incorrect.
(d) It is not suitable for large concerns.
B. Quantitative Methods

1. Point Method or Manual System : This is the most widely usecL,

method. It, along with the factor-comparison method, involves a more detailed,
quantitative and analytical approach to the measurement of job work. Under
this method points are used which represent the weights for the factors.
When this method is used for job evaluation, the job-description is
compared with the definitions of each of the factors. The appropriate degree of
each factor is chosen and the number of points which are associated with that
degree are taken. After all the factors have been evaluated, the total points are
recorded for the job, on the basis of which the worth of the job is determined.
Following is the procedure for job evaluation :

(a) All factors related to jobs are to be considered.

(b) Job description is to be prepared, if already not prepared.
(c) All factors are evaluated in terms of points.
(a) Each job is rated factor by factor and then the values of points are
added up.
(e) All jobs with nearly the same points are classified into one grade.
The wages are then fixed on the basis of total points of each job.
Merits

(a) It is an objective method and wage differentials are numerically

explained.

(b) It ensures accuracy of evaluation as definitions are written and there is

no difficulty in understanding the various terms.

(c) Scales once developed can be used for a long time.

(d) A job can be easily evaluated in terms of money on the basis of total
points.

(e)There is no room for bias or prejudice in job evaluation

as all factors are defined.

Job Evaluation and Merit Rating

14