Introduction to Labour Cost

Labour cost is a significant element of cost especially in an organisation using more manual operations. It is the cost of human Endeavour in the product and requires coordinated efforts for its control. The management objective of keeping labour cost as low as possible is achieved by balancing productivity with wages. Low wages do not necessarily mean low labour cost. Low labour cost is possible by giving substantial increase in wages against corresponding increase in productivity. The gain is reflected both in labour cost as well as in overheads expense per unit, since overheads are distributed over larger volume. Again, the productivity of labour is quite flexible. Given right type of motivation and incentive, it can reach amazing scale. It does not have any limitation like machines. Labour cost is a vital factor not only affecting the cost of production but also industrial relations of the organization. No organization can expect to attract and attain qualified and motivated employees unless it pays them fair remuneration. Employee remuneration therefore influences vitally the growth and profitability of the company. For employees remuneration is more than a means of satisfying their physical needs. Wages and salaries have significant influence on our distribution of income, Consumption savings employment and prices. Thus employee remuneration is a very significant issue from the viewpoint of employer’s employees and the nation as whole.