Page 115 - DCOM202_COST_ACCOUNTING_I

Unit 6: Labour Cost

Notes

Notes The classification of indirect labour depends upon the manufacturing methods
and pattern of the organisation and there cannot be any universally acceptable set of
classification for indirect labour.

6.1 Labour Turnover

It denotes the percentage change in the labour force of an organisation. It is a common occurrence
that the workers do change their jobs. Either they leave their jobs for better prospects or better
environments or they are forced to leave an employment. Such mobility is quite normal and
known as labour turnover.
Cost of labour turnover is treated as an overhead expense and should not be charged direct to
any work order.

1. Labour turnover according to separation method
= Number of employees left during a period/Average number of employees during a
period × 100

2. Labour turnover according to flux method
= Number of addition + separations during a period/Average number of employees
during a period × 100.

Causes of Labour Turnover

A study into the causes of labour turnover helps the management in proper planning and action
for reducing this rate. The reasons may be divided into two categories:
(a) Avoidable Causes of Labour Turnover: The various avoidable causes are:
(i) Lower wages being paid in the organisation,
(ii) Lack of planning of higher management,

(iii) Unsatisfactory working conditions in the factory,
(iv) Lack of job satisfaction,
(v) Lack of medical and transport facilities,
(vi) Discrimination between one worker and another worker,
(vii) Bad relationship with supervisors and management,

(viii) Lack of proper adjustment with workers,
(ix) Unauthorized long absence from duty,
(x) Migratory character of Indian industrial workers, and
(xi) Lack of safety measures.

(b) Unavoidable Causes of Labour Turnover: The various unavoidable causes responsible for
labour turnover are:
(i) Death, retirement disablement of the worker,
(ii) Domestic disputes of the workers,

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