Personnel Department: The personnel department is responsible for various activities like recruitment, training, transfer, termination, implementation of incentive schemes and maintaining records

regarding the labor force. Actually the labor cost control starts from the recruitment of labor force.

Care should be taken that recruitment is done at right time and there is a right man for the right job. Square pegs in round hole should be avoided; otherwise there will be dissatisfaction amongst the workers. Recruitment should be made only when a Labor Requisition [format given below] is received from the concerned department. Firstly, records should be checked to verify whether a person is available in other departments or not and only when it is ensured that the required type of

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persons is not available, recruitment should be made from outside sources like educational institutes, technical institutions, newspaper advertisements, employment exchanges etc. After the recruitment of worker, his detailed personal record is prepared which includes details regarding his date of joining, previous experience if any, family history, educational qualifi cations and so on. His other details like department, scale of pay, clock number, various deductions to be made etc. are informed to the pay roll department for arranging his payment. The personnel department prepares a Personal Record Card for each employee. In this card the entire information about the employee is given.

Personnel department also performs other important functions like maintenance of statutory records required under various labor laws, recording of absenteeism, labor turnover, disciplinary action etc.

The format of Labor Requisition and Personal Card is given on the next page.

Labor Requisition

Department: Date:

Please arrange for workers for the following categories for my department with effect from ---. This is in accordance with the original/revised budget.

Number of employees requisitioned

Category Job specifi cation Description Remarks

Special remarks if any: Approved by

Requisitioned by:

Action Taken:

Personnel Record Card:

ABC CO. LTD.

Personnel Record Card

Name: Clock No.

Address: Emergency Phone No.

 Permanent L.I. Policy No.

 Present Grade No.

 Emergency

1. Engagement Particulars 2. Employment Record

A. Present Employment 3. Wage Rate Record

B. Previous Employment 5. Education

4. Time Keeping and Leave Record 6. Training and Progress

7. Separation 8. Annual Report

Labor Cost Computation and Control

53 I.I Labor Turnover: Labor turnover, which is also called as ‘attrition’ is a major problem in the modern

times. Labor turnover can be defi ned 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 organisation, the fi rst one is that an experienced employee will be lost and secondly new person who is replacing the old one, may not have same qualifi cations 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 organisation tries to minimise the labor turnover. However, some proportion of labor turnover is actually necessary, as it will bring in fresh ideas in the organisation. 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.

I.II Measurement of Labor Turnover: It is essential for any organisation to measure the labor turnover.

This is necessary for having an idea about the turnover in the organisation and also to compare the labor turnover of the previous period with the current one. The following methods are available for measurement of the labor turnover.

O Additions Method: Under this method, number of employees added during a particular period is taken into consideration for computing the labor turnover. The method of computing is as follows.

Labor Turnover = Number of additions/Average number of workers during the period  100

O Separations Method: In this method, instead of taking the number of employees added, number of employees left during the period is taken into consideration. The method of computation is as follows.

Labor Turnover = Number of separations/Average number of workers during the period100

O Replacement Method: In this method neither the additions nor the separations are taken into consideration. The number of employees replaced is taken into consideration for computing the labor turnover.

Labor Turnover = Number of replacements/Average number of workers during the period  100

O Flux Method: Under this method labor turnover is computed by taking into consideration the additions as well as separations. The turnover can also be computed by taking replacements and separations also. Computation is done as per the following methods.

Labor Turnover = ½ [Number of additions + Number of separations] /Average number of workers during the period  100

Labor Turnover = ½ [Number of replacements + Number of separations] /Average number of workers during the period  100

I.IIICauses of Labor Turnover: Computation of labor turnover and a report of the same help the management in taking action for minimising the labor turnover. It will also be useful if the management fi nds out the reasons for the labor turnover. Broadly, causes of labor turnover can be divided into two categories, avoidable and unavoidable.

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54

 Avoidable Causes: These causes include the following.

• Dissatisfaction with the job

• Dissatisfaction with the working hours

• Dissatisfaction with the working environment • Relationship with colleagues

• Relationship with the superiors like supervisors

• Dissatisfaction with monetary and non monetary incentives

• Other reasons such as lack of facilities like insurance, absence of promotion chances, lack of proper training etc.

 Unavoidable Causes: These causes include the following.

• Personal betterment • Retirement

• Death

• Illness or accident • Change in locality • Termination

• Marriage

• National service

• Other reasons like lack of residential facilities, family commitments, attitude etc.

I.IV Cost of Labor Turnover: For an organisation, labor turnover results into a cost. If labor turnover is very high, it will result in high cost and hence efforts should be made to prevent the same. The costs of the labor turnover can be grouped into the following categories, preventive and replacement. These are explained below.

O Preventive Costs: It is said that preventions is always better than cure. Same thing is applicable in case of labor turnover. It is always better to prevent the labor turnover rather than taking action after it has taken place. The costs incurred for preventing the labor turnover are known as preventive costs. These costs are as follows.

O Cost of personnel administration which includes expenditure incurred in maintaining good relationships between the management and the workers.

O Cost of medical services incurred for improvement in medical facilities and also for motivating the employees.

O Expenditure incurred on welfare measures like sports facilities, transport, housing, cultural activities, canteens etc.

O Certain schemes like pension, gratuity schemes and other post retirement benefi ts.

O Replacement Costs: These costs are incurred for removing the effect of the labor turnover and include the following costs.

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55

O Cost of recruitment and training of new workers

O Loss of output due to delay in recruiting new workers

O Loss due to ineffi ciency of new workers.

O Cost of increased spoilage

O Cost of tool and machine breakage.

The preventive costs should be collected under different standing order numbers and are apportioned to different departments in proportion to the number of persons engaged in each department.

Replacement costs arising on account of fault of a particular department, such replacement costs may be charged directly to that department. If however, the labor turnover is due to shortsighted policy of the management the cost is collected as an overhead item and is apportioned to departments on the basis of number of persons engaged in each department.

O Illustrations on Labor Turnover:

1. During October 2007, the following information is obtained from the Personnel Department of a manufacturing company.

Labor force at the beginning of the month 1900 and at the end of the month 2100

During the month, 25 people left while 40 persons were discharged. 280 workers were engaged out of which only 30 were appointed in the vacancy created by the number of workers separated and the rest on account of expansion scheme. Calculate the labor turnover by different methods.

Solution:

Computation of Labor Turnover

I. Additions Method: Number of additions/Number of average workers during the period  100

= 280 / 2000  100 = 14%