Labour Bureau Government of India

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CHAPTER-V

LABOUR COST

Labour cost is one of the significant factors for studying the economic viability of any industrial activity for an entrepreneur before venturing into the industrial field.   It helps in reliable costing, wage fixation on a realistic basis, logical collective bargaining, evolving implementation and evaluation of welfare measures, study of trends in labour cost over a period of time, location of industry, etc.   Labour Cost data are also important for wage policy formulation at the national and regional levels.  With this end in view, data on various aspects of labour cost are collected every year, which inter-alia, include the expenses incurred by the industrial establishments on wages/salaries, bonus, contributions to provident and other funds and staff welfare expenses in respect of all category of workers employed directly as well as through contractors.   The aggregate of all these components gives the total labour cost.   When used in conjunction with the number of mandays worked, it gives the average labour cost per manday worked. 

5.1         Average Labour Cost

State-wise and Industry-wise data on average labour cost per manday worked by category of workers during the year 2000-01 are given in Tables 5.1.1 and 5.1.2, respectively.  These Tables reveal that at all India level, average labour cost per manday worked in respect of all workers was Rs. 126.21.  Amongst directly employed workers, the average labour cost per manday worked for men was Rs. 139.96, while for women it was just Rs. 85.59.   Average labour cost per manday worked for children was reported as Rs. 84.05.   For workers employed through contractors, the average labour cost per manday worked was Rs. 105.83.   In Public Sector, average labour cost per manday worked was Rs. 201.50 as compared to Rs. 124.60 in the Private Sector and Rs. 170.35 in the Joint Sector.

5.2         Average Labour Cost by States

Table 5.1.1 reveals that highest average labour cost per manday worked in respect of all workers was reported at Rs. 182.21 in Chandigarh, followed by Rs. 176.27 in Maharashtra and Rs. 171.18 in Goa.  On the other hand, lowest average labour cost per manday worked was reported in Bihar at Rs. 68.60.  Among woman workers, the highest average labour cost per manday worked was reported in Chandigarh at Rs. 183.79, whereas the lowest average labour cost per manday worked was reported in Orissa at Rs. 52.09 only.  Among children, the highest and the lowest average labour cost per manday worked were reported in Uttar Pradesh (Rs. 182.65) and Assam (Rs. 25.10), respectively.

In four States/Union Territories, viz. Punjab, Chandigarh, Haryana and Uttar Pradesh, the average labour cost per manday worked in respect of woman workers was higher than that of their male counterparts. The reason for more average labour cost on woman workers may be either due to some arrears payment to these workers during the current financial year or employment of majority of woman workers in more skilled jobs in some of the industries in these states.

5.3         Average Labour Cost by Industries

Analysis of Table 5.1.2 reveals that for all workers, the highest average labour cost per manday worked was reported at Rs. 492.90 in the industry group '353–Manufacture of aircraft and spacecraft‘, whereas, the lowest average labour cost per manday worked was reported in industry group '201-Saw milling and planing of wood' at Rs. 69.39 only.  Among woman workers, the highest and lowest average labour cost per manday were again reported in industry groups ‘353-Manufacture of aircraft and spacecraft‘ (Rs. 235.96) and '201-Saw milling and planning wood’ (Rs. 50.14), respectively.  Among children, the highest and lowest average labour cost per manday worked were reported in industry groups '171-Spinning, weaving and finishing of textile‘ (Rs. 256.42) and '154–Manufacture of other food products‘ (Rs. 25.10).

Atleast in seven industry groups, viz., 291, 293, 311, 313, 315, 333 and 343, average labour cost per mandays worked in respect of woman workers was higher than that of their male counterparts. The reason for more average labour cost on woman workers may be either due to some arrears payment to these workers during the current financial year or employment of majority of woman workers in more skilled jobs in these industries.

5.4         Composition of Labour Cost by Components

5.4.1 Wages/Salaries as Component of Labour Cost

State-wise and Industry-wise statistics on wages/salaries per manday worked are presented in Tables 5.2.1 and 5.2.2, respectively.  These Tables reveal that at all India level, average labour cost per manday worked on wages/salaries was reported at Rs. 110.60 for men, Rs. 67.47 for women, Rs. 72.95 for children, Rs. 94.81 for contract workers and Rs. 101.82 for all workers.

Amongst States, the highest wages/salaries per manday worked for all workers was reported in Chandigarh at Rs. 143.70, followed by Maharashtra at Rs. 138.94. Among woman workers, the highest and lowest wages/salaries paid per manday worked were reported in Chandigarh (Rs. 147.10) and Assam (Rs. 42.91), respectively.

Among Industries, the highest and lowest wages/salaries paid per manday worked to all workers were reported in industry groups ‘353–Manufacture of aircraft and spacecraft‘ (Rs. 419.40) and '201-Saw milling and planing of wood‘ (Rs. 61.09).  Among woman workers too, the highest and lowest wage/salary per manday worked were observed in these industry groups.

5.4.2                        Bonus as Component of Labour Cost

State-wise and Industries-wise statistics on bonus paid per manday worked during the year 2000-01, are presented in Tables 5.3.1 and 5.3.2, respectively.  These Tables show that at all India level, average amount of bonus paid per manday worked for all workers was Rs. 9.45.  Among States, the highest and the lowest amount of bonus paid per manday worked to all workers was reported in Kerala (Rs. 14.41) and Orissa (Rs. 4.76), respectively.

Amongst different category of workers, at all India level, the average amount of bonus paid per manday worked was reported to be at Rs. 9.79 to workers employed through contractors, Rs. 11.23 paid to directly employed male workers, Rs. 7.56 to directly employed female workers and Rs. 6.24 to child workers.

Among contract workers, the highest amount of bonus paid per manday worked was reported to be at Rs. 43.40 in Madhya Pradesh, whereas, no bonus was paid in Chandigarh and Uttranchal.  The highest amount of bonus paid per manday worked to male workers was reported at Rs. 17.40 in Kerala and the lowest at Rs. 6.50 in Orissa.  For woman workers, the highest amount of bonus paid per manday worked was reported at Rs. 18.00 in Goa and the lowest at Rs. 1.52 in Bihar.  In five States/Union Territories, viz., Punjab, Chandigarh, Uttar Pradesh, Gujarat and Goa the average amount of bonus paid per manday worked to female workers was higher than that of their male counterparts.

Among Industries, the highest and lowest amount of bonus paid per manday worked to all workers were reported in industry groups '353-Manufacture of aircraft and spacecraft‘ (Rs. 20.38) and ‘014-Agricultural and animal husbandry service activities, except veterinary activities’ (Rs. 3.92), respectively.  Among contract workers, the highest amount of bonus paid per manday worked was reported at Rs. 28.63 in industry group ‘160-Manufacture of Tobacco products‘.  Among directly employed woman workers, the highest amount of bonus paid per manday worked was recorded as Rs. 17.86 in industry group ‘223-Reproduction of recorded media’.

Atleast in 10 industry groups, viz., 151, 192, 202, 223, 271, 291, 292, 293, 311 and 315, female workers were paid higher amount of bonus per manday worked as compared to their male counterparts.

5.4.3                        Contributions to Provident and other funds as Component of

 Labour Cost

State-wise and industry-wise statistics on contributions to provident funds and other funds made by employers for their employees are presented in Tables 5.4.1 and 5.4.2, respectively.  It is observed that at the all India level, employers contributed Rs. 12.39 per manday worked for all workers towards provident and other funds.  For male, female and child workers, this amount was Rs. 14.70, Rs. 8.35 and Rs. 4.48, respectively. Among Sectors, contribution towards provident and other funds per manday worked was Rs. 23.88 in Public Sector, Rs. 15.99 in Joint Sector and Rs. 12.19 in Private Sector.

Table 5.4.1 reveals that the highest and lowest contribution towards provident and other funds per manday worked were made in Delhi (Rs.20.87) and Orissa (Rs. 5.94), respectively.

     Analysis of the Table 5.4.2, reveals that the highest and lowest contribution towards provident and other funds per manday worked were made by employers in industry groups ‘231-Manufacture of coke oven products’ (Rs. 53.13) and ‘142-Mining and quarrying n.e.c.’ (Rs. 0.81), respectively.

5.4.4                        Welfare Expenses as Component of Labour Cost

State-wise and Industry-wise statistics on expenses incurred by employers on the welfare of their workers during the year 2000-01 are presented in Tables 5.5.1 and 5.5.2, respectively.

The Table 5.5.1 reveals that at all India level, on an average Rs. 7.90 per manday worked were spent by the employers on providing welfare facilities to all workers.  Among States, the highest amount on the welfare of their workers was spent by employers in Goa at the rate of Rs. 15.70 per manday worked, whereas, the lowest amount of Rs. 2.56 was spent on this account in Bihar.  Among contract workers, the highest amount per manday worked on welfare of the workers was spent in Kerala at the rate of Rs. 11.64, whereas the lowest welfare expenses per manday worked were incurred in Jharkhand at the rate of Rs. 1.35. The employers spent no amount to this effect for contract workers in Chandigarh.

Table 5.5.2 reveals that the highest amount of Rs. 38.54 per manday worked was spent on providing welfare facilities by the employers in industry group '353–Manufacture of aircraft and spacecraft‘, followed  by Rs. 28.32 in industry group ‘232-Manufacture of refined petroleum products’ in respect of all workers. Employers spent the lowest amount of Rs. 1.20 per manday worked on welfare expenses in industry group ‘142-Mining and quarrying n.e.c.'.

5.5          Percentage of Different Components of Labour Cost to Total Labour Cost

State-wise and Industry-wise statistics of percentage of various components of Labour Cost, viz., (i) wages/salaries; (ii) bonus; (iii) contribution to provided and other funds, and (iv) staff welfare expenses to total labour cost has been depicted in Tables 5.6.1 and 5.6.2, respectively. 

 At all India level, the percentage share of different components of labour cost to total labour cost on wages/salaries, bonus, provident  & other funds and staff welfare expenses was 80.67 percent, 5.94 percent, 8.13 percent and 5.25 percent, respectively.

The share of wages/salaries in the labour cost varied between a highest of 89.49 percent in Jammu & Kashmir and a lowest of 74.55 percent in Goa. Contribution of bonus to total labour cost ranged between a highest of 8.99 percent in Kerala and the lowest of 3.18 percent in Bihar.  Contribution to provident and other funds in total labour cost was highest at 11.98 percent in Delhi and lowest at 3.87 percent in Daman & Diu.  Highest and lowest percentage on staff welfare expenses as component of labour cost were reported in Pondicherry (9.99 percent) and Chhattisgarh (1.95 percent), respectively.

Among industries, the percentage of wages/salaries to the total labour cost was the highest at 92.71 percent in the industry group '014-Agricultural and animal husbandry service activities, except veterinary activities’, followed by 92.58 percent in the industry group ‘142-Mining and quarrying n.e.c.'.  The percentage contributions of provident and other funds to total labour cost was highest at 21.71 percent in industry group ‘231-Manufacture of coke oven products‘ and lowest at 0.28 percent in industry group ‘142-Mining and quarrying n.e.c.'. The percentage contribution of bonus in the total labour cost ranged between the highest of 8.61 percent in industry group ‘191-Tanning and dressing of leather, manufacture of luggage handbags, saddlery and harness’ and the lowest of 2.79 percent in industry group ‘300-Manufacture of office, accounting and computing machinery.  The percentage share of staff welfare expenses in total labour cost varied between a highest of 9.33 percent in industry group ‘343-Manufacture of parts and accessories for motor vehicle and their engines' and a lowest of 1.11 percent in industry group '014-Agricultural and animal husbandry service activities, except veterinary activities’.

5.6          Percentage of Labour Cost to Total Cost of Production

Labour cost is one of the main components of the total cost of production for any industrial establishment.  The percentage of labour cost on workers to total cost of production indicates the share of the labour in industrial sector in a country.  In the changing scenario of world economy in terms of liberalization, privatization, globalization and modernization, the percentage share of labour cost to total cost of production is bound to change over a period of time.   The time series data on the percentage of labour cost to total cost of production may be of immense use in overall economic planning and framing labour policies and programmes.  With this aim in view, the data on percentage share of labour cost to total cost of production by States, Industries and Sectors have been presented in Tables 5.7.l and 5.7.2, respectively.

The Table 5.7.1 reveals that at all India level, labour cost constituted just 3.44 percent of the total cost of production during the year 2000-01 in Sample Sector.  The percentage of labour cost to total cost of production was 7.22 percent in Public Sector, 2.64 percent in Joint Sector and 3.42 percent in Private Sector.

Among States, the highest percentage of labour cost to total cost of production was reported in Kerala (4.79 percent), followed by Tamil Nadu (4.75 percent) and Chandigarh (4.70 percent).  The lowest percentage of labour cost to total cost of production at 1.00 percent was reported in Dadra and Nagar Haveli.  Out of a total of 26 States/Union Territories, percentage of labour cost to total cost of production was reported to be more than 4 percent only in six States/Union Territories, viz., Chandigarh, West Bengal, Bihar, Karnataka, Kerala and Tamil Nadu.

In Public Sector, the percentage of labour cost to total cost of production varied between a lowest of 1.45 percent in Chhattisgarh and a highest of 28.36 percent in Assam.  In Joint Sector, the percentage of labour cost to total cost of production varied between a lowest of 1.02 percent in Dadra & Nagar Haveli and a highest of 36.61 percent in Jammu & Kashmir.  In Private Sector, the percentage of labour cost to total cost of production varied between a lowest of 1.00 percent in Dadra & Nagar Haveli and a highest of 4.76 percent in Kerala.

Industry-wise and Sector-wise percentage of labour cost to total cost of production is presented in Table 5.7.2.   It may be seen from the Table that the highest percentage of labour cost to total cost of production was recorded at 41.27 percent in industry group ‘142-Mining and quarrying n.e.c.’, whereas, the lowest percentage of such cost was reported in industry group '151–Production, processing and preservation of meat, fish, fruit vegetable, oil and fats‘ at 1.08 percent.

In Public Sector, the percentage of labour cost to total cost of production varied between a lowest of 1.12 percent in industry group ‘232-Manufacture of refined petroleum Products’ and a highest of 76.01 percent in industry group ‘359-Manufacture of transport equipment n.e.c.’.  In Joint Sector, the percentage of labour cost to total cost of production varied between a lowest of 0.70 percent in industry group  ‘292-Manufacture of special purpose machinery’ and a highest of 50.45 percent in industry group '353-Manufacture of aircraft and space craft’.  In Private Sector, the percentage of labour cost to total cost of production varied between a lowest of 1.02 percent in industry group '151-Production, processing and preservation of meat, fish, fruit vegetable, oil and fats‘ and a highest of 41.27 percent in industry group ‘142-Mining and quarrying n.e.c.’.

TABLES