Note on Department Involved in Labor cost control and their functions

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Department Involved in Labor cost

The objective of labor cost control is achieved through the intensive and co-ordinated efforts of various departments. These departments are:

  1. Personnel department
  2. Engineering department
  3. Rate or time and motion study department
  4. Time-keeping department
  5. Payroll department
  6. Cost Accounting department

1. Personnel Department

Generally, each and every business organization has a recruitment policy of its own. For the execution of the recruitment policy of an undertaking, a separate ‘Personnel Department’ is made under the headship of a ‘Personnel Manager’. The main objectives of this department are recruitment and selection, training, transfer, discharge, promotion and fixation of wages and fixing salaries of employees. This department is considered for providing an efficient labor force and lays down good personnel policies to be followed by the entire organization.

The functions of personnel department are as follows:

  • Selection and recruitment of most needed workers for the organization.
  • Maintain the detailed and up to date record of workers.
  • Promotion, transfer and discharge of the workers after their evaluation.
  • Development of different forms for maintaining the records of workers.
  • Provide training and conduct seminar, a workshop for the worker.

2. Engineering Department

In order to gain proper utilization of labor force in an industrial undertaking, it is necessary to make the use of proper production techniques and to provide healthy working conditions to the workers. For this, an engineering department is set up. This department includes in maintaining control over working conditions and production methods for each job.

The function of engineering department are as follow:

  • Preparation of plans and specifications for each job scheduled for production.
  • Supervision of production activities within production departments.
  • Inspection of jobs after they are completed to ensure that they are satisfactorily completed.
  • Conducting research and experimental works before undertaking new jobs.
  • Maintaining safety check and efficient working conditions so that there may be a minimum possible accident and conducive environment efficiency and health of workers.

3. Rate or Time and Motion Study Department

While performing a job or work, a worker or a machine has to make movements. It is the study of movements of the workers as well as machine while performing an operation. Motion study is mainly done for the purpose of eliminating useless motions. The department that is primarily concerned with the jobs of making of time and motion studies of labor and plant operations, job analysis and setting wage rates is called time and motion study department or the rate.

Time study is done to determine the required time for the operation. It is conducted after the motion study. For determining a standard time, various techniques are used under time study. An average worker is done as a model worker and basic or standard time is fixed for a job or operation giving allowances of time to the workers for smoking, drinking water and so on.

The following are some important advantages of time and motion studies:

  • These studies help in determining the proper speed of work by eliminating unnecessary movements.
  • They help in fixation of suitable wage rates and the introduction of wages plans.
  • The efficiency of workers gets increased because they are asked to follow correct procedures.
  • They help in increasing output by a greater efficiency and less human fatigue.
  • They help in assessing the correct labor requirements of an organization.
  • These studies help in the cost of production per unit and increasing total earnings of workers.
  • They facilitate labor cost budgeting and labor cost control.

4. Time-keeping Department

For an efficient labor organization, it is necessary that all workers including those who are paid on piece work basis should be punctual. Late arrival or early departure of a worker causes disturbance even as regards to the work of others. It is, therefore, necessary to have a good system of keeping record of the time of arrival and departure of workers whether they are paid on the basis of time or piece works.

For the general purpose of exercising control over arrival and departure of workers, a separate Time-keeping Department is set up under the headship of a “Time-Keeper”.

The following are the functions of time-keeping department:

  • It maintains up-to-date attendance of workers.
  • It finds out the idle time of each worker to control and minimize it.
  • It keeps the record of time spent by each worker including records of normal and overtime works.
  • It also keeps the detail records of the workers’ arrival and departure time in the workplace.

5. Pay Roll Department

The payroll department is set up for disbursement of wages rate and computation in a business concern. Payroll department is concerned with the computation of gross wages rate of the workers and making necessary adjustment with a view to ascertaining the net amount of wage rate payable to them.

Pay Roll concerned with how much employees have earned during a period and involve calculation of gross and net amount payable to each employee.

The main function of payroll departments are:

  • To maintain the record of the job classification, department and wages rate for each worker.
  • To verify and summarize the time of each worker as shown by the daily time card.
  • To calculate the amount of wages earned by each worker.
  • To prepare the payroll wages sheet for each department.
  • To maintain permanent payroll records for each worker.
  • To make the disbursement of wages and salaries to the workers.

6. Cost Accounting Department

Cost accounting department is responsible for the accumulation, classification and analysis cost data in a business concern following the cost accounting system. Labor cost is one of the important elements of total cost. In a large business concern, representative of the cost accounting department is involved in production department in order to make proper accumulation, classification and analysis of labor costs.

These representatives work under the direct supervision and control of the cost accountant. They assist the cost accountant in computing the labor cost of production by departments, process, operations, production orders, jobs, etc.

The functions of cost accounting department are as follows:

  • To collect all types of information about cost and reporting management with analysis.
  • To determine the cost of each work.
  • To calculate labor cost by using the time card, job card and payroll.

Forms Related With Labor Cost Control

There are different forms which are used for labor cost control. Some of them are mentioned below:

  • Labor Placement Requisition

If in any department, the vacancy has been caused by the allowed establishment, the departmental head or manager will send a formal written request to the personnel department in the form of a ‘Labour Placement Requisition’. The specimen of a ‘Labour Placement Requisition’ is shown below:

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Source:onlineaccountreading.blogspot.com

  • Employee’s History Card

For each person employed, the personnel department prepares Employee's History Card which shows the particulars of the employee, name and address of the previous employer, the cause of leaving the previous job, previous experience, date of appointment, date of joining and wage rate at a commencement.

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  • Time Card

The card that aims to record the incoming and outgoing time of the workers is called time card. Such card is prepared on the weekly or monthly basis as per requirement. The personnel of time keeping department maintains such card.

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  • Piece work card

In a factory where the workers are paid on the basis of piece work, a piece work card is issued to each worker. On the piece work card, a worker gets recorded the quantity of output done and time spent on it. The piece work inspector puts his signature on the piecework card.

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  • Payroll Sheet

When wages are paid on the basis of time, the Wages Sheet is prepared on the basis of time cards or clock cards. But, when the workers are paid on the basis of output, the wages sheet is prepared on the basis of piece work cards. Wages sheets are prepared department-wise is under the control of costing department.

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Source:onlineaccountreading.blogspot.com

References:

Koirala, Madhav et.al., Principles of Accounting -XII, Buddha Prakashan, Kathmandu

Shrestha, Dasharatha et.al., Accountancy -XII, M.K. Prakashan, Kathmandu

Bajracharya, Puskar, Principle of Accounting-XII, Asia Publication Pvt. Ltd., Kathmandu

  1.  Cost accounting department is responsible for the accumulation, classification and analysis cost data in a business concern following the cost accounting system. 
  2. The card that aims to record the incoming and outgoing time of the workers is called time card.
  3. The payroll department is set up for disbursement of wages rate and computation in a business concern.

Advantages of Piece Rate System

  1. Simplicity:The incentive to workers
  2. Ascertainment of accurate labor cost
  3. No payment for idle time
  4. Proper care and use of machines and tools

Disadvantages of Piece Rate System

  1. Less attention to quality
  2. Inefficient use of machines and materials
  3. No guarantee of minimum wages
  4. Dissatisfaction among inefficient workers
  5. Adverse effect on worker’s health:

 

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