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Home /  Accounting for Labour
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  • Estimated reading time : 89 Minutes
  • Accounting for Labour | Importance of Labour Cost | Labour Cost Control | Fringe Benefits

  • Arjun EP
  • Published on: December 27, 2021

  •  

     

     

    Accounting for Labour | Concept of Labour

    Every manufacturing company and business organization needs human being resources.

    These humans being may be resource of administrators and labour.

    Without labour, a manufacturing company cannot complete its production.

    It is saying that talents, calibers and skilled manpower are other assets of the business organization.

     

    Labour cost is the important part in manufacturing and Construction Company.

    After materials, labour cost is the largest part in production.

    Every labour has his merits and demerits.

    To control labour cost, organization should understand to workers.

    To take more work from workers, the organization should satisfy them.

    When workers do best work, cost per unit will be decreased.

     

    There are three types of labour.

    They are unskilled labour, semi-skilled labour and skilled labour.

    Unskilled labour gets fewer wages but skilled labour gets highest wages.

     

    Format of employees history card (personnel record card)

    Everest Company Limited

    Employee History Card

     

     

    Name:                                   

    Clock/Card No;      

    Father’s/husband’s name:         

    Date of appointment:      

    Education:   

    Department:           

    Date of birth:          

    Date of joining:      

    Address:       

    Basic salary:

    1. Permanent:        

    Grade:

     

    Marital status:        

    2. Local:       

    No. of children:      

     

    Son:      

    References: 

    Daughter:        

    1.       

    Name of previous employer:     

    2.

    Reason for leaving:           

     

     

    Importance of Labour Cost

    Labour cost is an important element of production; some importances of labour cost are given below:

    The main importance of labour cost is to determine labour cost of production.

    It helps to minimize idle time of the workers.

    It helps to effective mobilization of work.

    It helps the manager to take decision regarding workers.

    It helps to cost control regarding labour.

    It provides basis of apportionment for indirect labour and general expenses.

    It helps to minimize labour turnover in the organization.

     

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    Labour Cost Control

    Without labour cost, it is not possible to production.

    All the production company needs labour.

    Large amount is paid for labour for production.

    Therefore, it is necessary to control labour cost.

    To control labour cost, proper exercise is needed.

    Efficient utilization of labour force is known as labour cost control.

    For most favorable labour cost control, management should use effective technique.

    From the functional point of view, labour is involved in following department:

    Personnel department

    Engineering or work study department

    Time and motion study department

    The time keeping department

    Cost accountancy department

    The payroll department

     

     

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    Need of Labour Cost Control

    The following are the needs or reasons to control labour cost:

    ·          To minimize labour cost as possible as.

    ·          To obtain maximum output by using skilled labour.

    ·          To obtain best quality goods by using good materials and skilled labour.

    ·          To adopt fair wages system for skilled and unskilled labour.

    ·          To minimize labour turnover.

    ·          To minimize wastage of materials and idle time of labour.

    ·          To coordinate among various departments about labour.

    ·          To use basis of apportionment for indirect labour and general expenses.

     

     

     

    System of Wage Payment

    The wage system should be planned with great care.

    The most suitable wage system helps to increase efficiency of the workers.

     It also brings satisfaction to the workers.

    An ideal wage payment system should have the following characteristic:

    It should be easily understood by workers.

    It should ensure satisfaction to both the employees and employer.

    The system should provide sufficient incentives to workers to work hard.

    It should guarantee a minimum wage at satisfactory level.

    It must be accepted by trade union.

    It should have flexibility.

    It should reduce labor turnover.

    It should be economical to operate.

    It should reduce absence and late attendance.

    It should be consistent with government policy.

    It should encourage productivity.

     

     

    Fringe Benefit | Non-Monetary Benefit to Labour

    Most of the company provides its employees extra benefits to encourage them.

    There are two types of benefits or expenses. One is monetary and other is non-monetary expense.

    Monetary expenses are paid in cash but non-monetary expenses are not paid in cash.

     

    Monetary   benefits

    Non-monetary (non-pecuniary) benefits

    Pecuniary benefits:

    ·        Medical facilities

    ·       Wages and salaries

    ·        Entertainment

    ·       Dearness allowance

    ·        Educational

    ·       Home allowance or house rent allowance

    ·        Training facilities

    ·       Overtime pay

    ·        Subsidized canteen facilities

    ·       Holiday and vacation pay

    ·        Subsidized transportation

    ·       Incentive for targeted/ standard production

    ·        Subsidized housing

    ·       Profit sharing bonus etc.

    ·        Re-creation and sports facilities

    ·        

    ·        Leave facilities etc.

    Deferred monetary benefits:

     

    ·       Contribution for provident fund

     

    ·       Contribution for group insurance

     

    ·       Contribution for pension fund etc.

     

     

     

    Keep in Mind (KIM)

    There are other some special allowances and incentives: such as chairman allowance, audit allowance and night shift allowance etc.

     

     

    Accounting for Pay-Roll or Wage Sheet

    Every organization and trading concern pays wages to its employees.

    Wages is paid daily, weekly or monthly basis.

    Pay-roll department maintains or calculates total wages payable to employee.

    The wages sheet records:

    Gross wages including basic wages, over time (OT), incentives and monetary benefits etc.

    Provided fund, insurance, fine, house rent, medical, advance etc are deducted from gross wages.

    Net wages = Gross wages – Deduction

     

    Combined Time and Pay-roll Card

    Name of the worker: …………………………………….……..…. Week ending: ………………………..…………………

    No. of worker: …………………………………………………………        Department: ………………………..…………………

    Days

     

    Regular time

    Over time

    Total time

     

     

    In

    Out

    In

    Out

    Normal time

    Overtime

    Sunday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Monday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Tuesday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Wednesday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Thursday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Friday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Saturday

    am

     

     

     

     

     

     

     

    pm

     

     

     

     

     

     

    Calculation of wages 

    Worked hours

    Rate

    Total amount

    Deduction

    Net amount

    Normal time

    ×××

    ×××

    ×××

    (×××)

    ××××

    Over time

    ×××

    ×××

    ×××

    (×××)

    ××××

    Total

    ××××

    ××××

    ××××

    (×××)

    ××××

     

    Name of the time keeper: ………………………………….…..….     Received net amount as above

    Name of the foreman: ………………………………………….……     Worker: ………………………………

    Name of pay-roll clerk: ……………………………………………..

     

     

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