How To Exercise Control Over Labour Cost | Cost Accounting - B Com PDF Download

The primary objective of labor cost control is to minimize the labor cost per unit of output while enhancing labor productivity. Achieving this goal necessitates a collaborative effort from all relevant departments engaged in labor cost management.

Departments Involved in the Control of Labour Cost

In a large organisation, generally the following departments are involved in the control of labour

cost:

Important Factors for the Control of Labour Cost

To exercise an effective control over the labour costs, the essential requisite is efficient utilisation; labour and allied factors. The main points which need consideration for controlling labour costs a the following:

1. Assessment of Manpower Requirement.
2. Time-and-motion Study.
3. Job Evaluation and Merit Rating.
4. Labour Productivity
5. Wage Systems.
6. Incentive Systems.
7. Control over Timekeeping and Time Booking,
8. Control over Labour Turnover.
9. Control over casual, contract and other workers.

Meaning of Terms used in Engineering and Work Study Departments

Time Study

Motion Study

Distinction between Job Evaluation and Merit Rating 

Job Evaluation differs from Merit Rating in the following respects:

Timekeeping

Meaning - Time keeping is a system of recording the arrival and departure time of each worker. 2.

Objective
(a) To provide data for the preparation of payroll.
(b) To meet statutory requirements {i.e.. Attendance Record)
(c) To ascertain the overtime
(d) To ascertain the idle time
(e) To ascertain the labour cost
(f) To provide a basis for apportionment of overheads if based on labour hours
(g) To control labour cost
(h) To maintain discipline and punctuality among the workers 

Methods - The various methods of Timekeeping are as follows:

Let us discuss these methods one by one.

(a) Attendance Register/Muster Roll

• It is kept at the gate of the factory.
• In and out time is recorded in the register either by the timekeeper or the worker.
• It is signed by the worker both at the time of arrival and departure.
• After the fixed reporting time worker are marked ‘late’ or’absent’ as the case may be.
• This method is very simple.
• This method is very economical.
• This method is very suitable for small organisations.
• Possibilities of fraudulent marking of attendance due to collusion between worker and time-keeping staff, may not be ruled out.

(b) Token/Disc Method 

• Each worker is allotted an identification number. 
• All tokens or discs bearing identification numbers are hung on a board at the factory gate. 
• When the worker arrives, he removes his disc/token from the board and puts in a box kept for the purpose at factory gate. 
• After the fixed reporting time, the box is removed and is replaced by another box indicating the extent of late attendance or latecomers may be required to report directly to the Time Keeping Office. 
• On the basis of Disc/Token put in the box, attendance is recorded in the Attendance Record. 
• This method needs proper supervision to ensure that a worker does not put in the box more than one disc/token. 
• This method is suitable in small organisations only.

(c) Time Recording Clocks 

• Each worker is given a clock card bearing an identification number. 
• All clock cards are placed in the rack which is kept at factory gate. 
• When the worker arrives, he takes his card from the out rack and punches his arrival time with the help of a machine and puts it into the ‘In’ rack. When the leaves the factory, this process is reversed. 
• Advantages of this method are: 
  • It provides accurate and quick recording of attendance 
  • It helps in reducing the chances of false and fraudulent entries. 
• Disadvantages of this method are: 
  • It requires heavy capital investment. 
  • It requires close Supervision to ensure that a worker does not punch more than one clock card.

Time Booking