Labour

Cost & Management Accounting

Labour

Direct LabourIndirect LabourLabour Cost ControlPersonnel DepartmentProduction or Engineering Department

Time Keeping Department

Time Keeping Department

A. Time Recording

B. Time Booking

Time Recording

Manual Methods: -Attendance Register -Disc SystemMechanical Methods - Time Recording

Clock - Dial Time RecorderElectronic Devices - Swipe Card - Bio-Metrics

Time Recording Clock-1

Time Recording Clock 2

Clock 3

Clock 4

Clock 5

Clock 6

Clock 7

Time Booking

Time Booking is tracing the time spent by the worker and identifying such time to jobs, processes or operation so as to calculate the wage cost of such processes, jobs or operations

Objectives of Time Booking

Ascertainment of Labour Cost

Control of Idle TimeDetermining Overhead Absorption Rate

Evaluating Performance of Workers

Determining Performance Bonus

Methods of Time Booking

Daily Time Sheets

Weekly Time Sheets

Job Tickets

Job Cards

Daily Time Sheets

Daily Time SheetName: Date:Clock Card No. Week No.Machine No. Cost Centre.

Work Order No.

Description

WorkDone

Time

HoursStarted

Finished

Workers’ Signature Foreman’s Signature Cost Office Reference

Weekly Time Sheets

Weekly Time SheetName: Date:Clock card No. Week Ending:Cost Centre/Department: Day Job No. Descriptio

nTime Total Hours For Cost Office

Start Finish Normal

OT Rate Amount

Worker’s Signature Foreman’s Signature Cost Office Ref:

Idle TimeIdle Time is the difference between the time for which payment is made and the actual time worked.

It is the time during which the worker did not engage himself in productive work

Causes of Idle Time

Avoidable Causes

Unavoidable Causes

Avoidable Causes

Failure of Power SupplyBreakdown of MachineryNon-Availability of MaterialStrikeLock-outNatural Calamities

Unavoidable Causes

Setting-up TimeMovement from Gate to

Production FloorMovement from One Job to

AnotherTime to Take InstructionTea-BreaksPersonal NeedsMinor AccidentsSeasonality of Industry

Over-Time

Work Carried on Beyond Normal Hours

Double the Rate of Payment Should be Avoided Normal Causes OT –charged to the

concerned Job or Batch Abnormal Causes OT-transferred to

Costing Profit and Loss account Only on Proper Authorisation

Causes of Over-Time

Completion of a Rush OrderMeeting a sudden spurt in demand

Completion of a Delayed WorkMaking up for Loss of Production due to Accidents, Flood or Other Natural Calamities

Labour Turnover

The rate at which the employees are leaving the organisation in a year

Also known as Attrition rate In IT industry, it was as high as 26-

30% in 2007- It has come down to 12-16% in 2009

It is unhealthy for the organisation It should be reduced as much as

possible through constant enquiry

Measurement of Labour Turnover

Separation Rate =

Replacement Rate

Labour Flux Rate

100ker

.XsberofWorAverageNum

sLeavingofEmployeeNo

100ker

ReXsberofWorAverageNum

placedNo

100ker

Re...X

sberofWorAverageNum

placementofNoLeavingNo

Causes of Labour Turnover

Avoidable Causes

Unavoidable Causes

Avoidable Causes of Labour TurnoverLow Wages Working

ConditionsLabour

RelationTrade Union

RivalryNo Job

SatisfactionLack of

Training

Bad Working Hours

Lack of Incentives

No Welfare Measures

Lack of Job Security

Unfair PromotionSupervisory Staff

Unavoidable Causes of Labour Turnover

Death, Retirement or Disablement Marriage or Pregnancy in case of

Women Better Career Opportunities Retrenchment Termination Change of Place of Work Change for Better Working

Environment Domestic Responsibilities

Preventive Cost of Labour Turnover

Higher Wages

Better Welfare Measures

Better Training

Better Working Conditions

Retirement Benefits

Replacement Cost of Labour Turnover

Recruitment CostCost of TrainingVacancy Time Gap and Loss of

OutputAdjustment Time for the New

WorkersLoss of QualityStrain on Tools & EquipmentHigher Scarp and Defective Work

Measures to Reduce Labour Turnover

Proper Recruitment

Good TrainingFair WagesGood Working

ConditionsLabour

AmenitiesLabour Welfare

Building up Loyalty Improving the Skills Improving Relations Communication of

Policies Grievances Cell Workers’

Participation in Management

Features of a Fair Wage System Guaranteed

Wage Uniformity Connected to CPI Recognition of

Efficiency Incentive for

Hard Work Equality Clarity

Progressive Scale

Consistency Flexibility Simplicity Fairness High Level of

Morale Viability of

operation

Systems of Wage Payment

Time RatePiece RateTaylor’s Differential Piece Rates

Halsey’s Incentive PlanRowan’s Incentive Plan

Time Rate

Wages are paid for the Time spent on the job

Output is irrelevantRate per Hour. Per Day, or per

MonthSuitable when Quality of work is

importantTrade Unions prefer this methodMonthly Payment goes with

other allowances

Advantages of Time Rate

Simplicity Easier Computation Encourages Skill Development Guaranteed Wages Minimum Loss to Material and

Equipmnets Equality of Wages Team Work Cordial Relation among the Workers Support of Trade Unions

Disadvantages of Time Rate System

Abilities are not DifferentiatedNo Incentive for Hard WorkRequires SupervisionDissatisfaction of Efficient WorkersLow MoraleNo Punishment for InefficiencyLabour Cost is not a variable cost

under this system

Piece Rate System

Rate per unit of outputOutput decides the wages payable

A standard time is taken and the standard output is determined

Time Wages for the standard output determines the piece rate

Advantages of Piece Rate System

Efficiency is recognisedMotivates the workersReduces labour cost per unitLabour cost is variableComputation of labour cost in

advance is easyLesser SupervisionLess Idle Time

Disadvantages of Piece Rate System

Quality suffers Difficulty of Fixing the standard

output and Piece Rate More scrap and Defective Work Damage to Tools and Equipment No Guaranteed Wages Uncertainty in Income Trade Unions Oppose the System

Taylor’s Differential Piece Rate System

Two Piece Rates: Low Piece Rate and High

No Guaranteed Wages Standard Output is fixed on Time and

Motion Study Low Piece Rate at 83% of standard

piece rate for output below standard High Piece Rate at 175% of standard

piece rate for output above standard

Merits and Demerits of Taylor’s Method

Increases Efficiency and Motivates the Worker ensuring a high level of morale

Differentiates among workers leading to bad labour relation

Detailed records are to be maintained regarding the output of the workers

Demoralises human values

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