This document discusses various methods for calculating labor costs and wages. It describes labor costs as direct and indirect costs that include salaries, benefits, and payroll taxes. It defines labor turnover as the ratio of employees leaving to the average number employed. It then outlines several common incentive systems for determining wages, including time rate, piece rate, and Halsey, Rowan, Merrick, Gantt, and Bedaux plans, which calculate wages based on standards like time taken, units completed, or percentage of output.
2. LABOUR COST
• The cost of labour is the amount of all salaries paid to the
workers, as well as the employee benefits and payroll taxes
charged by an employer. The labour costs are broken down
into direct and indirect (overhead) costs
3. LABOUR TURNOVER
• Labour turnover is the ratio of the number of persons leaving
in a period to the average number employed.
• Labour turnover is calculated using the formula: Employee
turnover = (number of employee departures / average number
of employees) x 100. It can be differentiated between annual
and monthly labour turnover calculation.
5. TIME RATE SYSTEM
• Time Rate Method is an approach for computing labor cost
which is based on the time taken at work place whether one
has actually utilized the time for productive output or not.
6. PIECE RATE SYSTEM
• Under piece system of payment, wages are based on output
and not on time. There is no consideration for time taken in
completing a task.
• A fixed rate is paid for each unit produced, job completed or an
operation performed. Workers are not guaranteed minimum
wages under this system of wage payment
7. TAYLOR'S DIFFERENTIAL PIECE RATE SYSTEM
• Taylor's differential piece-rate system posits that the worker
who exceeds the standard output within the stipulated time
must be paid a high rate for high production.
• On the other hand, the worker is paid a low rate if he fails to
reach the level of output within the standard time.
8. HALSEY PLAN
• Under Halsey Plan, the standard time for the completion of a
job is fixed and the rate per hour is then determined. If the
time taken by a worker is more than the standard time, then
he shall be paid according to the time rate.
• Formula:-Hours worked × Rate per hour + (50% × time saved
× rate per hour)
9. ROWAN PLAN
• Under Rowan Plan, the standard time for the completion of a
job and the rate per hour is fixed. If the time taken by the
worker is more than the standard time, then he is paid
according to the time rate.
• FORMULA:- TxR+(S-T)/SxTxR
10. MERRICK PLAN
• The worker is paid the straight price rate up to 83% of the
standard output, 10 % above the normal rate for producing
between 83% – 100% and 20% above the normal rate for
producing more than 100% of the standard output. Here also,
the minimum wages of the worker are not guaranteed.
11. GANT TASK PLAN
• Gantt Task Bonus Plan is a wage incentive method of rewarding
the employees who outperform the expected set output by the
organization
12. BEDAUX PLAN
• The Bedaux Plan is an incentive scheme in which the standard
time for the completion of a job is fixed and the rate per hour
is defined.