2. TABLE OF CONTENTS
Labour
Types of labour
Labour turnover
Methods of Labour turnover
Techniques of controlling Labour cost
Variations of piece wages
Premium bonus systems
3. LABOUR
DEFINITION:
Labour cost is an important element of cost and forms a significant part of prime cost
and total cost.
TYPES OF LABOUR:
Labour is classified into
1. Direct Labour : it is the cost of Labour expended in altering the construction,
composition of the product and has direct influence in proportion to the output
2. Indirect Labour: It is the amount of wages paid to workmen who are not directly
involved in altering the composition of the product.
4. TECHNIQUES OF CONTROLLING LABOUR COST:
1. Personnel department
2. Engineering and work study department
3. Time keeping department
4. Pay roll department
5. Cost accounting department
5. PERSONNEL DEPARTMENT
LABOUR TURNOVER:
Labour turnover may be defined as change in Labour force during a specific period of
time. High turnover indicates that the Labour is not stabilised and there are frequent
changes by way of workers leaving the organisation. At the same time low Labour
turnover indicates inefficient workers are being retained in the organisation.
METHODS OF MEASUREMENT:
1. Separation method:
2. Labour turnover = Number of employees left from the org / Average number of
employees during a period
6. Replacement method:
Labour turnover = Number of employees during a period / Average number of
employees during a period × 100
Flux method:
Labour turnover = Number of employees left + Number of employees recruited /
Average Number of employees during a period
Additions method:
Labour turnover = Number of additions during a period / Average Number of
workers during a period ×100
7. PIECE RATE SYSTEM
VARIATIONS OF PIECE WAGES:
There are 4 Variations of piece wages:
1. Straight piece rate
2. Differential piece rate
Taylor’s differential piece rate system:
The main features under this method are as under:
Time wages or min wages are not guaranteed
Standard output is determined and standard time is fixed for the output based on time and motion studies
Merricks multiple piece rate system:
This method is an improvement over Taylors method. This method has 3 levels of performance.
Wages are paid at Ordinary piece rate those workers whose performance is less than 83% of standard output ; 110% of the
ordinary piece rate is given to workers whose performance I’d between 83% - 110%
8. Gantts Task and Bonus plan:
Under this method a standard time is fixed for a task performed by workers. Actual time taken is
compared with the standard time and efficiency is ascertained.
PREMIUM AND BONUS PLAN:
The following are some of the popular premium bonus systems:
1. Halsey premium plan – T×R + 50% (S –T) R
2. Halsey- weir premium plan
9. 3. Rowan system
Total earnings under rowans plan = T×R +(S – T /S) ×T×R
4. Barth’s variable sharing plan
5. Emerson efficiency plan
6. Bedaux point premium system
Earnings = Hours worked × Rate per hr +75/100 × BS ×RH/60
7. Accelerating premium plan
