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Already have a direct labour budget? Here are two way to improve it

by , 30 September 2014
When it comes to managing your production expenses, your direct labour costs are the most important. You need to ensure you always have enough money to pay your workers, while ensuring you don't make a loss because of the number of staff you have.

That's why you create a direct labour budget to help you manage this expense.

But does your direct labour budget work as effectively as it could?

If you answer 'no' to that question, don't worry. We'll show you how to improve it...

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Here's how to improve your direct labour budget

Budgets are never static. And you must revisit them regularly. If you want to make improvements to your budget, you need to pay attention to the different influences that can affect your budget. Outside forces, like labour unions, can control the different elements of your direct labour budget.
This will help you constantly improve your direct labour budget. 
Here are two tips you can use to help you do this.
Tip #1: You can't control the unions, but you can adjust your budget when changes happen. 
For example, make sure you increase direct labour costs in your budget if you have to increase wages. You must also initiate fresh employee contracts when old contracts come to an end. 
Tip #2: Employee skill levels can have a major impact on your direct labour budget. More technology added to your production process leads to more production at a higher rate. This means production and income increases. The moment you start making use of technology, you need fewer employees which is a money saving move. 
Your direct labour budget will have a positive change, because you'll need less labour. Make sure you reflect this in your budget.
The key to improving your direct labour budget is constantly updating it as things change. Make sure you do this regularly to avoid paying too much for labour.

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