New to Manufacturing? Seeking Help with Manpower Cost Analysis Presentation!

Request for Assistance on Manpower Cost Analysis

Recently, I joined a manufacturing company. I have experience in the service sector. In this company, my CEO has given me a task to prepare a presentation on Manpower Cost Analysis. Please help me out. What formula can we use, and what details should we consider?

Thank you.

Regards,

Dear Sharada,

Probably, your CEO is asking for a breakdown of the total HR budget. "Employee Cost" includes expenses towards monthly salary, statutory payments, medical insurance payments, training expenses, staff canteen expenses, staff welfare expenses, expenses towards picnics and outings, expenses towards uniforms, expenses towards overtime, and so on. Sit with your accounts and find out the breakdown of the percentage on various counts.

Percentage of Employee Cost Against Total Sales

The second important thing is: What is the percentage of your employee cost against total sales? Calculate this percentage for the last three financial years and also show any Year-on-Year (YoY) or Quarter-on-Quarter (QoQ) increase/decrease.

Earlier, there was a post on HR Statistics. Click the following link to read my comments:

https://www.citehr.com/328790-hr-sta...ml#post1503992

Prepare your analysis report and submit it to your CEO. Please share with us his observations or findings on your report. This will help other members of this forum to prepare similar reports if required.

Regards,
Dinesh Divekar
[Phone Number Removed For Privacy Reasons]

Clarifying Manpower Cost Analysis Requirements

Manpower cost analysis can have multiple meanings. You need to get clarification from your CEO on what he needs. It could be a simple analysis of manpower costs, providing a breakdown of salaries under different categories. Alternatively, he may want it organized by department or by designation/grade. In a manufacturing setting, he might be requesting it to be presented per unit of production or compared with previous years.

You may end up working on something unnecessary (thus taking more time than required), or you could align with his expectations. Your CEO might misinterpret this as incompetence on your part, when in reality, it's just a matter of understanding the scope of his instructions.

Manpower Cost Analysis in a Manufacturing Company

Manpower cost analysis is the work of a Cost Accountant in a manufacturing company. First, you have to identify the manpower of the different departments and segregate them properly. A few persons work for all the departments, like your CEO and yourself.

The second step is to segregate the fixed and variable manpower, i.e., there will be some who are permanent and some who are casual. You have to pay the salary to the permanent staff whether there is any production or not, but in the case of casual employees, the company only takes their services when there is an extra requirement for manpower. Now, the CTC of both groups will be different. In this way, you will get the fixed as well as the variable cost of each department.

For the persons who work for all departments, you can simply combine all the salaries of these individuals and allocate them according to the production of the departments. The last part is to add the specific manpower cost of the departments to the cost of the common manpower. By following these steps, you will obtain the manpower cost of the departments.

Dear Sharada, after raising the query, you received a sufficient number of responses. How did you finally calculate the manpower cost? Did your calculation satisfy the CEO, or did he raise objections on some points? We would appreciate it if you could provide us with some feedback.

Thanks,

Dinesh Divekar
[Phone Number Removed For Privacy Reasons]