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TDC
- questions - discussions about manufacturing cost.
This area is a list of visitor's feedback, in the form of a question or discussion on the various manufacturing cost factors listed on Downtime Central. Items hear may be discussed further in our manufacturing discussion group.
Brian S. - A Process Controller in the discrete industry. USA
Category:
In the calculation you use 30% fringe benefits. Could you define fringe benefits for me please? thank you
DTC Reply:
This magic number (30%) is a used by
most accountants probably do to their schooling. In line with the TDC
methodology, we would recommend a real number be calculated, as the true
percentage varies from industry to industry, company to company. (The current
average for 2000, is 27.4%.) Then based on this true number you can categorize
the way that best suites your company.
The most common fringe benefits being
health, insurance, and pension. Others ways of categorizing are workers'
compensation, paid vacations, sick leave, various employee taxes such as social
security, and all other non-cash fringe benefits. In the manufacturing industry,
it is pretty cut N dry, but other employment could include membership to the
country club, company car, etc.
Example: Wage and Salaries (72%),
Legally Required Benefits (8%), Paid Leave (7%), Insurance (6%), Retirement
(4%), Supplemental Pay (3%).
Many fringe benefits are not taxed in
the same manner as wages, this should be taken into account when deriving the
magic number (percentage). Fringe benefits have increased over time do to the
employer and employee tax advantages. For companies/corporations with a large
number of employees, this is yet another metric to seek financial opportunity.
Fringe benefits also have non-tangible values also. With the increased focus on and cost of training these days, offering fringe benefits is more profitable to an employer as a tool to lower turner over rates thereby protecting their training investment.
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