Labour Cost
Click to editby Master Presented : subtitle style Akshay Bhambri (301) Nitish Kumar Singh (322) Rohit Mehta (324) Harsh Shah (333)
Labour Cost
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 costing is required to be carried out for
maintaining proper record of expenditure on payment to the workers.
The Managers Thought - Labour Cost
C L A S S I F I C A T I O N
Components of Pay Structure
Basic wage Idle time Overtime Bonus & premiums Incentive wage plans
System of wages
Should satisfy both employees & employer.
Types of Incentives
Types of incentive wage plans
Halsey premium plan i. Rowan plan ii. Taylors differential piece rate system iii. Merrick differential piece rate system iv. Gantt task & bonus plan v. Halsey- weir premium system vi. Bedaux point premium system vii. Emerson efficiency system
i.
HALSEY
Time taken* rate + %(standard time-time taken)* rate
PREMIUM
ROWAN SYSTEM
Time taken* rate + std time time taken* time taken* rate Std time
JOB
EVALUATION
It is the comparative MERIT RATING
It enables
determination of the most appropriate and effective labour remuneration structure that can be adopted for the enterprise.
analysis and evaluation of the merit of the employees within an enterprise.
Employees can be
merit-rated for promotion and incremental payments.
Why control Labour Cost ?
Inefficiency of labor Wasting material due to improper supervision Idle time normal & abnormal causes. Unusual overtime work Inclusion of dummy names in payrolls etc Quality of goods gets affected due to improper labor
control
Controlling Techniques
Idle Time Cost
Treatment of normal idle time cost i. ii.
treated as direct wages. treat as an item of factory expenses and recover as indirect charges.
.Treatment of abnormal idle time cost i. i.
does not form part of cost of production Additional cost/loss
ELIMINATE ABNORMAL CAUSES & MINIMISE NORMAL ONES
Methods of measuring workforce performance
Labour turnover Labour productivity Absenteeism
Turnover and costing
Labour productivity
It is the amount of goods and services that a worker produces in a given amount of time
Out
Total value of Output Total Number of workers
Cost per unit
Total Labour Cost Number of units produced
Labour Productivity
Click to edit Master subtitle style
Defined as the number of staff who miss
Absenteeis m
work as a proportion of the total number of staff.
Number of staff absent per time period x 100 Total number of staff days worked per time period
Labour Absenteeism
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An Industrial Case in ChinaEasyweld Welding equipment company
An Industrial Case in ChinaEasyweld Welding equipment company
Easyweld Welding Equipment Company is one of the Hong Kong-invested industrial enterprises and the company makes welding equipment in Pun Yu District, Guangzhou. There are 30 factory workers, one assistant supervisor and one supervisor in the plant. Their daily work is to construct welding equipment on an individual or group basis. The workforce comprises three levels of workers, and the classification is by work experience and skills level. The remuneration structure is mainly based on time worked. Level 1: Fresh workers: Newly recruited workers are offered a probation period of 3 months. The daily wages are RMB20, and the workers work 8 hours a day and 6 full days a week. As the quality of work is of
Level 2: Workers with less than one years experience on the post: Once workers have their employment confirmed after the 3-month probation period, they are paid monthly salaries. The factory adopts a merit rating, and the workers salaries depend on their skill levels. Workers at a low to medium skill level are paid RMB500 to 600 a month, while workers at a high skill level are paid up to RMB 1,000 a month. In addition, a merit payment of RMB50 a month is offered to certain workers, depending on their attitude. Level 3: Workers with more than one years experience at the post: These workers, who include the assistant supervisor and the supervisor, are paid RMB1,000 to 1,500 a month. In addition, they are offered a group bonus. Since product quality is of prime concern in engineering production, there is no incentive scheme for pushing up production volume. Nevertheless, if there is premium production in any one month, these
For all levels of workers the factory pays for food and accommodation on top of labour wages or salaries. Both the food costs and accommodation costs are around RMB200 a month for each worker. The factory also pays RMB10 a month as social welfare contribution for each worker. This social welfare contribution by employers is mandatory in China. A pension fund contribution is not mandatory in China; it is established on mutually-agreed basis by both employers and employees. The factory also contributes RMB4 a month as medical insurance for each worker. In addition, the employer and workers contribute an equal payment for social insurance; the amount is around RMB80 to 90 a month from each side. In order to encourage staff development, the factory offers a work-related education sponsorship of RMB600 to RMB1,000 to workers. Workers usually take work-related courses like electronic engineering,
Other benefits provided by the company
the factory pays for food and accommodation
on top of labour wages or salaries around RMB 200.
factory also pays RMB 10 a month as social
welfare contribution for each worker.
RMB 4 a month as medical insurance for each
worker.
In order to encourage staff development, the
factory offers a work-related education
Labour Turnover a major issue
High labour turnover is a significant problem in Guangdong. In recent years, Easyweld has suffered a labour turnover rate of around 20% a year. Usually, this turnover happens when workers do not return to work after the Chinese New Year (CNY) holidays. To remedy this situation, the factory offers an annual bonus to its level 3 workers. Half of the annual bonus
Concluding Remarks
Labour cost accounting involves the study of the behaviour of labour, performance measurement, time and motion studies, control on attendance and government regulations. In modern industrial enterprises the workers wage is based upon job evaluation, merit rating, incentive remuneration schemes and government ordinances. Thus we have studied a case study of an industrial firm in CHINA.
