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Labour Cost Control

Labour cost control is important for overall cost control and reduction. It involves focusing efforts on labour budgeting, timekeeping, reducing labour turnover, and improving productivity. Specifically, recruitment should only be according to the labour budget. Accurate timekeeping and time booking systems help ensure discipline and track productive vs idle time. Labour turnover should be minimized as high turnover leads to loss of experienced employees and additional training costs for new hires. Productivity can be improved through time and motion studies to set standards and providing incentives to workers who meet targets.

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151 views2 pages

Labour Cost Control

Labour cost control is important for overall cost control and reduction. It involves focusing efforts on labour budgeting, timekeeping, reducing labour turnover, and improving productivity. Specifically, recruitment should only be according to the labour budget. Accurate timekeeping and time booking systems help ensure discipline and track productive vs idle time. Labour turnover should be minimized as high turnover leads to loss of experienced employees and additional training costs for new hires. Productivity can be improved through time and motion studies to set standards and providing incentives to workers who meet targets.

Uploaded by

shishir174
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LABOUR COST CONTROL:

1. INTRODUCTION: Another important element in the total cost is the labour cost.
In order to ensure proper cost control and cost reduction, there should be proper
control over the labour cost. Controlling labour cost is a bit difficult as compared
to other elements of the cost as it involves human factor. Therefore for controlling
the labour cost, there should be focused efforts on various fronts. All these aspects
are discussed in the following paragraphs
2. LABOUR COST CONTROL: Efforts are required on the following aspects for
ensuring a cost control and cost reduction in case of labour.
I. LABOUR BUDGET OR A MANPOWER BUDGET: Control over the labour
cost should be exercised right from the recruitment of the labour. This is
necessary as otherwise there can be over staffing and productivity of
employees may suffer. Besides this, due to excessive manpower, there will be
additional burden in the form of salaries and wages. Therefore all recruitments
should be strictly according to the Labour Budget and as per the job
description.
II. TIME KEEPING AND TIME BOOKING: In order to ensure discipline and
also for following statutory regulations, there should be a proper system of
time keeping. Time keeping is a system of recording time in and time out for
workers. This ensures that the workers are coming on time and leaving on
time. Where there is a payment system based on time spent, time keeping
records help to find out exact number of hours spent on the job. In todays
situation, in most of the organizations, a mechanical time recording system is
used, which helps to maintain accurate record of time spent on job. Time
Booking is different from time keeping. Time booking systems aim to find out
the productive time spent on the job. These systems keep a daily record of
how the worker has spent his time while he was on the job. Thus there can be
control on the idle time through time booking systems.
III. LABOUR TURNOVER: Another important area which affects the labour cost
substantially is the Labour Turnover. : Labor turnover, which is also called as
attrition is a major problem in the modern times. Labor turnover can be
defined as, a change in the labor force as compared to the total labor force.
Labor turnover is prevalent in every industry, however the proportion of the
same changes from industry to industry. For example, turnover in information
technology sector is the highest today due to ample job opportunities due to
the rapid growth of this sector. Labor turnover should not be very high as it
will result into double loss to the organization, the first one is that an
experienced employee will be lost and secondly new person who is replacing
the old one, may not have same qualifications and experience and till he is
accustomed to the new job, his productivity is bound to be low. Similarly
suitable training will have to be given to him in order to acquaint him with the
environment, which will also result in additional expenditure. Due to these
reasons, every organization tries to minimize the labor turnover. However
some proportion of labor turnover is actually necessary, as it will bring in
fresh ideas in the organization. If labor turnover is reduced to zero, it will
indicate that the employees do not have any opportunity outside and hence
they are surviving. Therefore some degree of labor turnover is always
desirable
IV. LABOUR PRODUCTIVITY: For control and reduction of the labour cost, it
is necessary to improve the labour productivity. For this, scientific study
involving time and motion study should be conducted for determining the
standard time required to produce a unit of the product. There should be
sufficient incentive provided to the workers who are able to achieve the target
given in the standard time allotted to them. There should be monetary as well
as non monetary incentives in built in the remuneration system so that workers
will bet sufficient incentive for achieving higher productivity.

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