Labour Notes 2011
Labour Notes 2011
Labour Notes 2011
Direct labours are that portion of salaries and wages which can, as a practical matter,
traced with and charged to a cost unit. Thus the wages paid to employees/ workers
engaged in manufacturing of a job or process like brick, spinning and weaving, are direct
labour cost.
Personnel department will recruit the workers and provide appropriate training if required.
The kind of training provided must suit the work trainee is supposed to do and must meet
the needs of the organization. Types of training includes induction training, job training,
apprentice training, supervisory training and management training.
Workers will be paid according to their qualification, experience in the related field and
the kind of job to be performed.
Recording time – detailed recording of attendance or time spent on a given job or work
Objectives
– to calculate the wages and preparation of payroll
- to analyse the time spent on a job
- to plan and control the labour
Recording document
- attendance time eg clock card/punch card
- job time eg job card, time sheet, job ticket
Time sheet
Indicates the jobs on which each employee worked and the direct labour time
consumed. The time sheet would be completed manually by employees, such time
14
are most reliable if the employees keep them current as the day progresses. Work
arriving at an employee station is accompanied by a tag or bar code specifying its
job order number. The times that work is started and stopped are noted on the
time sheet. These time sheets should be collected and reviewed by supervisors to
ensure that the information is accurate.
Large businesses often use electronic time-keeping software rather than manual
time sheets. Employees simply swipe their employee ID cards and job cards
through an electronic scanner when they switch from one job to another job. This
software allows labour cost to accumulate by both job and department. In highly
automated factories, employee time sheets may not be used because of the low
proportion of direct labour cost to total cost. However, machine time can be
tracked through the used of machine clocks or counters in the same way ass
human labour tracked. As jobs are transferred from one machine to another, the
clock or counter can be reset to mark the start and stop times. Machine times can
then be equated to employee-operator time. Another convenient way to track
employee time is through bar codes that can be scanned as products pass through
individual workstation. There are also numerous time and attendance software
tools.
After these uses, time sheets are filled and retained so they can be referenced if
necessary for any future information needs. If total actual labour cost for the job
differ significantly from the original estimate, the manager responsible for labour
cost control may be asked to explain the discrepancy. In addition, if a job is billed
on a cost-plus basis, the number of hours worked may be audited by the buyer.
This situation is quite common and especially important when dealing with
government contracts. Hours not worked directly on the contracted job cannot be
arbitrarily or incorrectly charge to the cost-plus job without the potential for
detection. The time sheets also provide information on overtime hours.
Job card
It is a piecework tickets or time tickets are used for the purpose of making the
time in and the time out in each activity where a worker works.
This document is used for recording the time spent by various workers on each
job. At the commencement of each batch or job, a batch or job number is allotted
to it and new job card is opened. The job card moves along with the job. The
starting date and time of each operation is entered in the job card. When the job is
15
complete, the total time spent by workers on the job can be ascertained from the
job card by totalling up time spent on each operation. In respect of jobs which
take a long time, reconciliation of attendance time and time booked on job
becomes difficult. Materials consumed in each operation are entered on the
reverse side of the card. It is also known as Labour Cost Card.
Job ticket
It is prepared daily by workers for each job worked on. It’s indicate the number of
hours worked, a description of the worked performed and the worker’s wage rate
(inserted by the payroll department). The total of the labour cost and hours for
different jobs shown on labour job tickets should equal the total labour cost and
labour hours for the period as shown on time cards.
Workers use time tickets to record the time they spend on each job and task. A
completed labour time ticket is an hour by hour summary of the employee’s
activities throughout on a specific job, the employee enters the job number on the
time ticket and note the amount of time spent on that job. When not assigned to a
particular job, the employee records the nature of the indirect labour task (such as
cleanup and maintenance) and the amount of time spent on the task. The daily
time tickets are also used as the basis for labour cost entries.
Remuneration method
1. Time based system – wages based on hours worked
Wages = hours worked x rate per hour
If worker can claim overtime, then wages = basic wages + overtime pay
Rate per unit can be straight piece rate, piece rate with guaranteed minimum rate
and differential piece rate.
Idle time
Unproductive time where no productions are made due to uncontrollable situation happen
such as machine breakdown, power failure, shortage of materials, etc.
Idle time will be treated as indirect labour costs and will be part of overhead costs.
Labor turnover is defined as a ratio of number of employees that leave a firm through
attrition, dismissal or resignation during a period to the number of employees on payroll
16
during the same period. It is a second major element of cost and the most difficult to
control. It also the most perishable and once lost cannot be recouped and this will leads to
increase in labour cost. Turnover is also measured for individual companies and for their
industry as a whole. If an employer is said to have a high turnover relative to its
competitors, it means that employees of that company have a shorter average tenure than
those of other companies in the same industry. High turnover can be harmful to a
company's productivity if skilled workers are often leaving and the worker population
contains a high percentage of novice workers.
17