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  #   017-095 - Charging For Internal Labour

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  To ensure an adequate calculation of the profit or loss of operating a particular business department, its important that all of the costs relative to the operation of a particular department/section are recorded as expenses for the department/section that has utilised the services and that the depa ...[Read more](#hikashop_show_tabular_description)

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 To ensure an adequate calculation of the profit or loss of operating a particular business department, its important that all of the costs relative to the operation of a particular department/section are recorded as expenses for the department/section that has utilised the services and that the department/service which has supplied those services receives a credit for having supplied those services.

This concept leads to the principle of charging for internal labour.

For example, if a business has established a Maintenance Section, which is available to attend to general routine maintenance in other departments/sections of the business, then its recommended that a separate cost centre for "Maintenance Section" be established and that cost centre should then charge the other departments/sections for the services e.g. internal labour that has been rendered to those other departments/sections.

This paper analyses that concept, under the following headings:

- Maintenance Profit Centre
- Cost Allocation
- Labour Classification
- Maintenance Employee Productivity
- Labour Oncosts (and this includes a full review of the oncosts that would be charged to maintenance type employees)
- Calculation Of Internal Charge Out Rate
- Charging For Internal Work
- Key Performance Indications To Be Monitored

and includes a Worksheet For The Calculation Of Internal Charge Out Rates to be used in businesses.