POSSIBILITY OF A 5-DAY WORK-WEEK
May 22, 1985
Work-Week
To,
Mr. N. M. Desai
Chairman,
Larsen & Toubro
While we were at Awarpur on 14th March,
you had mentioned this to me and asked me to examine the pros-and-cons.
In the enclosed note, I have
confined myself to examining the “cons”.
I have kept out detailed
calculations which can be explained in person.
Incase a slide-presentation is
required, I would request a week’s notice.
With kind regards.
Enclosed: 3 folders.
POWAI
A 5-Day Week Proposal
- Highlights.
- Impact On
Production
Reduction in the total
working-hours (and consequently in the effective working-hours) is
15%.Therefore OUTPUT will reduce to the same extent.
IMPACT:- Rs. 19.65 Crores (for
1985)
Impact
On Contribution
Assuming an average contribution
of 12% off-top, reduction in contribution will be approx. Rs. 2.4 Crores.
- Impact On
Unit-Cost
A 15% reduction in OUTPUT, will
mean that the fixed cost (about 60% of the total cost) will have to be
recovered from 85% of OUTPUT.
As a result, cost of 85% of
OUTPUT will increase by 10.59% - say 11%.
Consequently cost/unit will
increase by 11%.
- Further Impact
On Contribution
Assuming that we are not able to
increase our unit sale–price (to compensate for the increase in unit cost), it
will only go to reduce the contribution further. Contribution off-top will
reduce from 12% to 2% as shown below:
|
|
|
Before |
After |
|
1. |
Quantity |
100 |
100 |
|
2. |
Unit cost |
1.00 |
1.11 |
|
3. |
Total cost |
100 |
111 |
|
4. |
Unit sale price |
1.1364 |
1.1364 |
|
5. |
Total sales value |
113.64 |
113.64 |
|
6. |
Contribution. - Rs. - % |
13.64 12% |
2.64 2.3% |
|
|
Decrease
in contribution % |
9.7% |
|
Thus output of Rs. 10849
lakhs (12763-1914) will fetch us only 2% contribution (as against 12% earlier),
resulting in a loss of 10% i.e. Rs. 1085 lakhs.
- Impact On
Hourly-Rate
(Labour & Overhead)
Labour-costs and overhead costs
remaining fixed and available man/ machine-hours reducing by 15%, the
hourly-rate will go UP by 18% as shown:
|
|
Before |
After |
|
COST (Rs) |
100 |
100 |
|
Man-M/C hour |
100 |
85 |
|
Hourly-rate |
1.0 |
1.1765 |
|
Increase |
17.65% |
|
- Impact Of Paid
Holidays/ Cl-Sl-Pl
The cost of any future increase
in the “Quota” of these, will mean an extra production-loss of 0.07% for each
day.
POWAI EXHIBIT A-1
|
NUMBER
OF DAYS / WEEK |
WORKING-HOURS
/ WEEK |
|
OPTION
#1
47 HRS. |
OPTION
#2
40 HRS. |
|
|
6 DAYS |
EXISTING ARRANGEMENT |
POSSIBILITY #1 |
|
5 DAYS |
NOT PRACTICAL |
POSSIBILITY #2 |
This will result in each
shift of 10 hrs. (or 3 X 10 = 30 hour day) resulting in 6 hr. total overlap
resulting in a loss of 9,68,000 man-hours per year.
POWAI EXHIBIT A-2
ASSUMPTIONS:
1) All the employees at Powai
& Madh who are presently working 47 hours per week, will work for 40 hours
per week and observe a 5 dat week.
2) There will be no
corresponding reduction in the remuneration of employees.
3) “Effective” working hours
will reduce in proportion to the reduction in total working-hours.
4) Number of Paid Holidays,
Casual Leave, Sick Leave and Privilege Leave will remain unchanged.
5) Labour productivity will
remain unchanged i.e. output per man/ machine-hour will not change.
POWAI EXHIBIT B
|
|
40
HRS / WEEK WORKING |
|||
|
IMPACT |
5
DAY WEEK |
6
DAY WEEK |
||
|
Effect |
Rs. Lakhs (per year) |
Effect |
Rs. Lakhs (per year) |
|
|
On Production (at Sales Value) due to
: 1) Reduced Working Hours (by 14.9%) 2) Paid Holidays 3) Casual Leave 4) Sick Leave 5) Privilege Leave |
Decrease Decrease Decrease Decrease Decrease |
(1914) ( 7 ) ( 7 ) ( 14 ) ( 23 ) |
Decrease Increase Increase Increase Increase |
(1914) + 51 + 51 + 94 + 173 |
|
TOTAL |
DECREASE |
( 1965 ) |
DECREASE |
( 1545 ) |
POWAI EXHIBIT C
|
40
HRS / WEEK WORKING |
||||
|
IMPACT |
5
DAY WEEK |
6
DAY WEEK |
||
|
Effect |
Rs. Lakhs (per year) |
Effect |
Rs. Lakhs (per year) |
|
|
On PBT due to 1) Loss
of Production (taking PBT @ 12% of Sales Value) 2) Higher
Unit Cost 3) Saving
in Transport 4) Saving
in Canteen |
Decrease Decrease Increase Increase |
(236) @12% of 1965 (1179) + 3 + 29 |
Decrease Decrease |
(185) @12% of 1545 (917) - - |
|
TOTAL |
DECREASE |
( 1383 ) |
DECREASE |
( 1102 ) |
POWAI EXHIBIT D
STORES –
CREDITING (AT SALES VALUE)
BUDGET 1984 – 85
Rs.
Lakhs
1)
PSE 46
2)
PEW 4080
3)
PSW +
MSW 6538
4)
P-PACK 2099
Total 127,63
- represents only
Powai Service Station.
- is exclusive of
PPE & Customer materials.
- is exclusive of
FSW, ASW & Hebal.
POWAI EXHIBIT E
MAN – POWER STRENGTH
|
|
LOCATION |
||
|
|
POWAI |
MADH |
TOTAL |
|
2nd shift |
1250 |
45 |
1295 |
|
3rd shift |
280 |
- |
280 |
|
Sub-Total |
1530 |
45 |
* 1575 |
|
1st + General Shift |
|
|
5596 |
|
Total |
|
|
7171 |
* 22% of total Manpower of 7171.
POWAI EXHIBIT F
|
|
PARAMETER |
General
Effect |
|
|
|
|
Non-Tangible |
Tangible |
|
1. |
Over-loading of “Service” departments |
Yes |
|
|
2. |
Demand to substitute “holidays”
falling on week-end for working days. |
Yes |
|
|
3. |
Problem of maintenance men/ security
staff working on weekly-off and getting compensatory off. |
Yes |
|
|
4. |
One day’s absenteeism would amount to
20% (one day out of 5 days) against current 16% (one day out of 6 days). |
Yes |
|
|
5. |
Impact of General Power-cut |
Yes |
|
|
6. |
Unanticipated problems with regard to
various types of “leave” |
|
Yes(to
some extent) |
|
7. |
Increase in incidence of prefixing/
suffixing leave to week-end |
Yes |
|
|
8. |
Reduce contact with outside world |
Yes |
|
|
9. |
Increased tendency for “outdoor” duty
at beginning/ end of working day (due to longer working-hours) |
Yes |
|
|
10. |
Delay in dispatch (FG) |
Yes |
|
|
11. |
Delay in receipt of R.M. |
Yes |
|
|
12. |
Increase in Working Capital |
|
Yes |
|
13. |
Increase in Overtime |
|
Yes |
|
14. |
Increase in Hourly-rate |
|
Yes |
|
15. |
Decrease in Profitability |
|
Yes |
|
16. |
Decrease in Physical output due to over-lap
of shift time |
|
Yes |
|
17. |
Non-availability (reduction) of
“Voluntary” extra working of supervisors and managers |
Yes |
|
L&T HOUSE EXHIBIT A
|
WEEK
CONSISTING OF |
WORKING-HOURS
PER WEEK |
|
OPTION #1
38
½ Hrs. |
OPTION #2
35
Hrs. |
|
|
5
½ days |
EXISTING
ARRANGEMENT |
NOT
WARRANTED |
|
5
days |
POSSIBILITY |
|
L&T HOUSE EXHIBIT B
|
|
WORKING
HOURS / DAY |
|
|
EXISTING |
POSSIBILITY |
|
|
|
Hrs.
– Mins. |
Hrs.
– Mins. |
|
MONDAY
TO FRIDAY SATURDAY |
7
– 0 3
– 30 |
*
7 - 42 - |
* A 10% longer “day”
L&T HOUSE EXHIBIT C
EFFECT DUE TO PAID – HOLIDAYS
|
LOSS
OF MAN – HOURS IN 1985 |
||
|
EXISTING |
UNDER
PROPOSED 5 DAY SITUATION |
INCREASE |
|
51,600 |
54,900 |
*
3300 |
* L&T HOUSE + JK BLDG +
EROS
476 employees X 15 days X 0.7
Hrs/ day = 5000 Hrs.
LESS
FOR SATURDAY
476 X 1 Day 3.5 Hrs/ day = 1700
Hrs.
NET = 3300 Hrs.
L&T HOUSE EXHIBIT D
MAXIMUM ELIGIBLE LEAVE
|
|
Existing |
Proposed
Possibility |
Increased |
|
Loss of Total Man-hours / year due to P.L.+S.L.+ C.L. |
183,300 |
201,600 |
18,300 |
|
Loss of Total Man-hours as a %age of
Total available Man-hours |
22.7% |
25% |
2.3% |
L&T HOUSE
EXHIBIT E
DIS-ADVANTAGES OF 5-DAY WEEK
- Overtime
Small but urgent jobs coming up on Friday evening would call for
overtime working on Saturday.
Thus overtime may go up.
- Office
Discipline
Due to longer working hours on week-days (7 Hrs. – 42 min. in
place of 7 Hrs.), late coming, early going would increase.
This is already a serious problem in the city-offices.
- Casual Leave
(Cl) / Sick Leave (Sl)
Prefixing/ suffixing of a single day CL/ SL to the long week-end
may go up.
- Outstation
Travelling
Sales staff would want to return to their home-base for long
week-end and restrict out-station tours to five days only.
- Interaction
Between Offices
Introduction of a 5 day work-week at L&T House and (possible)
extension thereof to other regional and branch offices (with differing paid
holidays) would reduce the “effective” interaction days between various
offices.
- Effect On Powai
& Other Manufacturing Locations
Introduction of a 5 day week at Bombay city offices, will result
in an irrestible pressure to have a 5 day week at Powai. This agitation may
well be spear-headed by the Managers and Supervisors of Powai who are already
unhappy at having to put in a 47 Hr work-week (as compared to 38 ½ hrs at
city-offices).
Many of these are already working 50/ 52 Hours-a-week since
factory works 6 days and they are required to stay-back on Sunday
afternoon.
This pressure will be “irrestible” considering that during the
last 4/ 5 years, some of the leading engineering firms have gone to a 5 day
week at their factories.
|
|
|
WEEK – DAYS |
WORKING HRS / WK |
|
1. |
PHILIPS |
One week – 6 day One week – 5 day |
Ave.
44 Hrs |
|
2. |
VOLTAS(Chinchpokli) |
5 day |
44 Hrs – 20 mins. |
|
3. |
VOLTAS
(Thane) |
5 day |
42 Hrs – 30 mins. |
|
4. |
SIEMENS |
Alternating
day
week & 5 day week |
Ave. 44 Hrs. |
|
5. |
GODREJ |
5 ½ day
|
45 Hrs. |
|
6. |
RALLIS |
5 day
|
42 Hrs – 30 mins. |
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