Post on 03-Nov-2014
description
Presented by :
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.
Labour Cost
The Manager’s Thought - Labour Cost
Major cost of concern
for the HRD
Important part of production
process
Decides price of product
Labour Costs
Direct
That portion of wages or
salaries which can be
identified & charged to a
single costing unit
Indirect Cannot be
correlated with production of
specific goods, applicable to mfg
activities generally (paid to foreman,stockkeeper,clerical staff)
CLASSIFICATION
Basic wage
Idle time
Overtime
Bonus & premiums
Incentive wage plans
Group bonus schemes
Components of Pay Structure
Should satisfy both employees & employer.
System of wages
System of wagesTime Wage or Day Rate
Piece Rate or Piece Work
Financial
•Employees contribution to PF, production & profit bonus, holiday & vacation bonus, old age pension
Non-financial
•Subsidised food & housing, transport to the workplace, employee’s children education, recreational facilities etc.
Types of Incentives
i. Halsey premium planii. Rowan planiii. Taylor’s differential piece rate systemiv. Merrick differential piece rate systemv. Gantt task & bonus planvi. Halsey- weir premium systemvii. Bedaux point premium systemviii.Emerson efficiency system
Types of incentive wage plans
HALSEY PREMIUM
Time taken* rate + %(standard time-time taken)* rate
Time taken* rate +std time – time taken* time taken* rate
Std time
ROWAN SYSTEM
JOB EVALUATION
It enables determination of the most appropriate and effective labour remuneration structure that can be adopted for the enterprise.
It is the comparative analysis and evaluation of the merit of the employees within an enterprise.
Employees can bemerit-rated for promotion
and incremental payments.
MERIT RATING
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
Why control Labour Cost ?
Personnel / Payroll department
Rate or time & motion study
Production planning – job analysis
Budgeting
Time - keeping
Cost accounting department
Controlling Techniques
Treatment of normal idle time costi. treated as direct wages.ii. treat as an item of factory expenses and recover
as indirect charges.
Treatment of abnormal idle time costi. does not form part of cost of productionii. Additional cost/loss
Idle Time Cost
ELIMINATE ABNORMAL CAUSES & MINIMISE NORMAL ONES
Methods of measuring workforce performance
Labour turnover
Labour productivity
Absenteeism
Labour turnover( High / Low )
Preventive costs
Costs incurred to keep turnover as low as possible
Replacement costs
Costs due to replacement of employees
Turnover and costing
Labour productivity
Output per worker
Total value of Output
Total Number of workers
Cost per unit
Total Labour Cost Number of units
produced
It is the amount of goods and services that a worker produces in a given amount of time
Labour Productivity
Absenteeism
Defined as the number of staff who miss 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
• Fresh workers: daily wages are RMB 20 ,workers work 8 hours a day and 6 full days a week, accounted on time rate basis.
Level 1• Less experienced, paid
monthly salaries, factory adopts a merit rating, and the workers’ salaries depend on their skill levels, paid up to RMB 1,000
Level 2• who include the assistant
supervisor and the supervisor, are paid RMB 1,000 to 1,500 a month. In addition, they are offered a group bonus,.
Level 3
An Industrial Case in China- Easyweld Welding equipment company
Other benefits provided by the companythe 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 sponsorship of RMB 600 to RMB 1,000
Labour Turnover – a major issueHigh labour turnover is a significant problem in Guangdong.In recent years, Easyweld has suffered a labour turnover rateof around 20% a year. Usually, this turnover happens whenworkers do not return to work after the Chinese New Year(CNY) holidays. To remedy this situation, the factory offers anannual bonus to its level 3 workers. Half of the annual bonusis paid before the CNY holidays, with the rest paid after theholidays. This type of arrangement provides a useful financialincentive to help the enterprise maintain its workforce
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 worker’s 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.