Question

explain how labour requirements are determined on the project and how will you determine actual Labour cost per task is within the allowable

Answer 1

Determination of actual Labour cost per task is within the allowable

The cost of labour per task is complex and varied. The actual cost of an employee’s work is very different than the hourly rate you pay them.

The variables that must be accounted for in calculating labour costs are-

(i)Work hours

How many hours does the employees work? Are their hours spent at different job sites,on performing different tasks?

Knowing the answers to the above questions is very crucial in accurately billing clients for labour and identifying the true amount of work hours allocated to each job.

The mobile time tracking system equipped with job costing will help you to track and allocate time worked per job and makes it easy for your workers to accurately clock in from the field.

(ii)Overtime pay and prevailing wages

If an employee is entitled for overtime pay, shift differentials, prevailing wages, or any other wage entitlements, verifying at which job they worked when they are owed those additional wages is vital.

With the use of right tools and effective job costing, this can easily be tracked.

(iii)Employer taxes

As an employer you are also responsible for paying federal and state taxes of your salary.

It includes FICA (Federal Insurance Contributions Act or Medicare and Social Security), FUTA (Federal Unemployment Act), and SUTA (State Unemployment Tax Act).

These taxes includes mere percentages of your earnings but it is a important factor while calculating cost per task and these must be added.

(iv)Workers Comp. insurance

Another cost you are responsible for paying is Workers Comp Insurance.

This insurance premiums are determined based on the risk of injury associated with the job your employee performs.

Typically, the more dangerous the job, the higher is the rate of WC insurance.

Example of   actual labour cost per task

Our employee is an electrician working at the hourly base rate of $20. In addition to the $20 per hour, there are additional costs like federal and state taxes as well as workers comp premiums.

Labour cost for 1 hour (20.00 per hour): $20.00

FICA ($20.00 X 7.65%): $1.53

FUTA ($20.00 X 0.6%): $1.2

SUTA ($20.00 X 3.0%): $0.60

WC rate for electrician ($20.00 X ($3.05 / 100)): $0.61

Subtotal per hour=$23.94

The labor requirements are determined in the project by following ways-

Basic information is collected and analysed so that a requirements plan can be developed.

It includes relevant information such as the number of units to be produced, the shift pattern and the number of working days per week and year.

The qualitative perspective takes into account responsibilities concerning work tasks as well as the mental and physical demands of the employees.

One tool used here is a qualification matrix to identify skills and qualification levels.

The quantitative staffing plays an important role in labour requirements planning ,the determination of gross and net staffing needs, among other things.

With respect to the net staffing needs, a further distinction is made between direct and indirect employees.

The results of qualitative and quantitative labour requirements plan are documented in the form of job charts, organizational structures and organizational charts.

But at the same time, the required staffing needs are monitored over defined periods in a process known as calendarization.

The breakdown of capacity planning makes it possible to determine in advance how many employees are required in the immediate future and in what areas of the company.