Labour constitutes an important element of the total cost of production. Human contribution is represented by labour. From the sensitivity point of view of the various cost elements, the most sensitive element is the labour cost, because human behavior is related to it. Therefore approach required to control labour cost is completely different from the approach required for the control of other cost elements. For the control of labour cost, the study of labour behavior, performance measurement, results analysis, time & motion study, control on the attendance & departure, in all matters human approach are essential.

Labour is such an element, the storing of which for the future is not possible, therefore it is similar to most perishable material. Keeping material idle will not result in loss unless such material is of perishable nature; but on the hand, keeping labour idle will result in loss as for such idle time also remuneration has to be paid. Labour has established itself as a very important part of the organization, in modern labour management & hence no problem with labour, except with human approach, can be successfully solved. If management takes any measure which affects the social, financial or political interest of the labour, that may result in strike disruption in work & drainage of money. As a result, a term agreement is entered by the present day management with the labour unions & the obligations mentioned therein are faithfully obeyed.

Labour cost control means labour cost control per unit. Unit cost can be reduced by obtaining more output against the same rate of remuneration. Thus labour cost reduction means for the same wage obtaining more output or for the higher wage obtaining more output but does not at all means wage-cut.

Industrial undertakings engaged the following different type of labours:

• Regular labour


• Hired labour


• Casual labour


• Out workers

'Regular labour' are those labour who have been recruited on the permanent requirements basis, 'hired labour' are those who have been hired through labour agents or contractors, casual labour' are those labours who have been engaged on temporary basis as & when required & 'out workers' are those who have been recruited as regular or casual labor but has been sent to sites or customers' premises.

Workers of all categories are classified into skilled labour & unskilled labour, besides the above classification.

Recruitment of workers: On the basis of sanctioned strength in each department, recruitment of workers is made through advertisement, employment exchange etc. Through interviews, medical examinations etc. selections of labour are made. Except in ordinary situations, number of workers sanctioned must not be exceeded by recruitment. In case, number of workers sanctioned need to be exceeded, prior sanction of extra hands should be obtained.

On the basis of demand made by any department, a separate department named personnel department or employment department made the appointment. The required demand for labour should be made in prescribed form showing the job specification etc.

The labour, after the appointment is posted to the concerned department. Simultaneous information is send to the wages department so that the labour is placed on the roll for the booking of his attendance & departure. A card named employees personnel record or service history card is opened which records all the necessary details of the worker in relation to his employment in the organization.

Each worker is allotted a number called ticket no. or token no. or clock no. or check no. , which is the identification of the worker. If two workers have the same name & surname, then they are identified by their different numbers. The entire factory could have one series of ticket numbers or different departments could have different series of ticket numbers.

As the labour is very sensitive element, the retrenchment of labour, whenever is required, must be done strictly on the basis of rules & procedure; should be mutually agreed upon by the employer & employees, otherwise there may be disturbance in the good labour relations. In case of shortage of work, lay off or retrenchment can be done only in accordance with certain conditions laid down in the acts.