Measures to Reduce Labour Turnover
All employers expect to have a certain degree of labour turnover, without it the company would stagnate. The average age of employees would increase (meaning also that a large number of employees might retire simultaneously); and there could be insufficient new blood coming into the organisation. No doubt many companies would be content if their separation rates lay between 10 to`15 per cent , though few rates in the private sector of industry and commerce are as low as this . if an employing firm wishes to reduce its labour turnover because it considers it as excessive for the area the industry, it may take the following steps to reduce labour turnover:
Pay Problems
- Increasing pay levels to meet competition.
- Improving pay structures to remove inequities.
- Altering pay systems to reduce excessive fluctuations and
- Introducing procedures for relating rewards more explicitly to effort or performance.
Employees Leaving to Further their career
- Providing better career opportunities and ensuring that employees are aware of them.
- Extending opportunities for training.
- Adopting and implementing ‘promotion from within’ policies and introduction more systematic and equitable promotion procedures.
- Deliberately selecting employees who are not likely to want to move e much higher than their initial job.
Employees Leaving Due to Conflict
- Introducing more effective procedures for consultation, participation and handling grievances.
- Improving communications by such means as briefing groups.
- Using the conflict resolution and team – building techniques of organisation development.
- Reorganizing work and the arrangement of office or workshops to increase group cohesiveness, and
- Educating and training management in approaches to improving their relationships whit employees.
The Induction crisis
- Improving recruitment and selection procedures to ensure that job requirements are specific accurately and that the people who are selected fir the specification.
- Ensuring that candidates are given a realistic picture of the job pay and working conditions. and
- Developing better induction and initial training programmes.
Shortage of Labour
- Improving recruitment, selection and training for the people required.
- Introducing better methods of planning and scheduling work to smooth – out peak loads.
Changes in Working Requirements
- Ensuring that selection and promotion procedures match the capacities of individuals to the demands of the work they have to do.
- Providing adequate training or adjustment periods when working conditions change and
- Adopting payment by result systems to ensure that individuals are not unduly penalised when they are only engaged on short – runs.
Losses of Unstable Recruits –
taking more care to avoid recruiting unstable individuals by analyzing the characteristics of applicants which are likely to cause instability and using this analysis to screen recruits.
Adequate Statistical Control –
There should be a carefully worked out system of records for keeping the required data. The management should have complete information about separations by shops, departments, occupations, sex, age, race, nationality length of service and education. This information will help a critical analysis. It will also be possible to collect statistical evidence to invite managerial attention to the problem. If management is properly convinced about the magnitude of the problem, adequate funds and attention may be provided for the solution of this problem.
Joint Control –
Joint control can be exercised through committee representing management and workers. These committees should cover the review of shop regulations, grievances etc. the formation of these committees will encourage mutual understanding and general co – operation.
Use Exist Interviews –
Some companies arrange an exist interview, when an employee calls for his final payment. A better means of getting necessary information may be an interview with employees some times after they have left .for this purpose, exit questionnaires may be prepared. This step may lead to useful information, which may have profound effect on reducing labour turnover.
Cost of Labour Turnover
Any change in the personnel of an organisation entails a financial loss, unless outweighed by certain gains. Labour turnover signifies a heavy investment rather than expense for unproductive effort. It essential constitutes an outgo, that bears little or no relationship to out put. The cost of labour turnover can be examined under two broad categories:
- Preventive costs and
- Replacement cost.
Preventive costs
The following costs may be listed under the heading preventive cost.
- Personnel Administration – It is a function concerned with maintaining good relationship between management and workers. This function is responsible for maintaining human relationship within an organisation.
- Medical Service – The health of a worker has a marked effect upon productivity. Some enlightened companies arrange for annual physical check – ups of all staff and employees within the organisation.
- Welfare – This includes the cost of sports facilities, laundry services etc. the provision of the services is made to retain the services of employees.
- Pension Schemes – Certain authors argue whether the cost of pension schemes should be included in the cost of labour turnover. It has been noted that workers tend to remain in the employment of companies operating a pension scheme.
- Better Scales, Bonus and Perquisite – In some organisations the amount paid for above mentioned a reason is more than the average amount paid in the industry to discourage labour turnover.
Replacement costs
Labour turnover is associated with replacements. Replacement necessitates recruitment, training and absorption of new workers. If a worker is replaced, a new worker will have to be trained to substitute the replaced worker. There will also be wastage and loss of production, if worker is new. Replacement cost will include cost of all these elements.
Following cost s can be summarised under this heading:
- Inefficiency of New Worker – It is difficult to measure exactly the losses due to inefficiency of new workers. Some authors hold the view that the extra wages cost can be calculated by the following formula:
The inefficiency of labour results in extra usage of services available in factory. This means additional overhead cost.
- Employment Department – The cost of recruitment should be included in the cost of labour turnover.
- Training and Induction – In most companies, some form of induction for new worker is undertaken. This should be included in cost of labour turnover.
- Loss of output due to delay in obtaining new Workers – The experience has revealed that sometime definitely elapses before any replaced worker joins the organisation. During this period, scheduled output is met by :
- Carrying a surplus labour force.
- Working overtime.
- If the scheduled output is not met, then there is direct loss of profit. All these factors add to cost of labour turnover.
- Cost of Tool and Machine Breakage – Tool and machine breakages are more frequent when untrained or new labour is employed. It adds to the cost of labour turnover, but it is practically a difficult exercise to determine relationship between the intake of new labour and the cost of repairs.
- Accident Frequency and Severity – When a new worker joins the factory, the chances of accidents and mishaps increase considerably. This may lead to additional cost of compensation, which finally adds to cost of labour turnover.
- Cost of Scrap and Defective Work – When a new worker joins, the amount of scrap and defective work increases. When the material used is of high value, the cost of scrap and defective work may have serious repercussions upon the overall cost of production. The cost of defective work, which is due to inexperience of new worker, should be taken as the cost labour turnover.
- Loss of Goodwill or Disadvantages Labour Contracts – If new worker is not put to the job, it will of the company, some the scheduled programme. In the hurry to save the goodwill of the company, some disadvantageous labour contracts may have to be entered into. All this adds to the cost of labour turnover.
The overall cost of labour turnover will appear in one or more of the items already mentioned. This cost can be shown as cost per worker employed or replaced or as a fraction to total cost of selling price. The most common way to express labour turnover cost is as follows:
Treatment of Cost of Labour Turnover
In most of the companies, the cost of labour turnover forms part of overhead. When costs are divided into ‘preventive costs’ and ‘replacement costs’. Preventive costs are charged to departments in proportion to labour strength. Replacement costs may be directly charged to product or it may also be treated like preventive costs. it does not appeal to reason to charge the replacement cost to a particular department, particularly when replacement arises due to short – sighted policy of management.
Bba Costing Accounting Topic Wise Short Notes of Direct Labour Accounting And Control
Bba Cost Accounting Topic is ‘Idle Time’ Shorts Notes
Idle Time
In the production process, lost time may occur for several reasons. The idle time is the difference between hours paid and hours worked. Where the workers are paid on time basis, the idle time is the difference between the time for which the workers were paid and that which they actually spent of production process. It is the labour time paid for but not utilised in production.
Causes of Idle Time
The idle time is classified into two types.
- Normal idle time , and
- Abnormal idle time
Causes of Normal Idle Time
A part of idle time is unavoidable and is considered as normal occurrence in the factory.
Illustrative list is given below:
- Travelling time from one job or department to another
- The distance covered between the factory gate and the department or actual place of work
- Elapse of time between finishing one job and starting another job
- Time spent to overcome fatigue
- Tea and lunch breaks
- Machine or job setting up time etc.
Causes of Abnormal Idle Time
The important causes for the abnormal time are given below:
- Temporary lack of work
- Machine breakdown
- Power failures
- Shortage of raw materials
- Waiting for tools
- Waiting for jobs due to unplanned production
- Stoppage of work due to managerial policy decisions
- Strikes and lock – outs
- Floods, earthquakes, etc.
Accounting Treatment of Idle Time
Normal Idle Time
The wages paid for the normal idle time period is treated as production overhead and absorbed into cost of product by adopting an absorption rate. The normal idle time in tools setting etc. can be charged at inflated rate. Jobs are charged at inflated rate.
Abnormal Idle Time
The wages paid for the abnormal idle time can be avoided by taking proper care and caution. It is not treated as part of cost and excluded from cost accounts and it is straight away debited to costing profit and loss account.
The reason for the idle time is to be analysed and the management need to know the reasons for avoidable idle time so that correction can be formulated to reduce and minimise the idle time. An idle time report is prepared as shown in table. for giving necessary information on idle time with an analysis of causes.