This document provides information about how an organization determines labor costs. It discusses the objectives and principles of an ideal wage system, including paying fair and equitable wages, improving productivity and employee motivation. The main methods of remuneration discussed are time wage systems, piece wage systems, and bonus/incentive systems. It also provides a case study of how Bata Pakistan Limited manages its workforce through a large retail network across the country.

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ALLAMA IQBAL OPEN UNIVERSITY
Course Managerial Accounting
Code (8508)
Semester Spring, 2015
Level MBA Marketing (3½ Years)
Tutor Sir Muhammad Abdullah
Name waQas ilYas
Roll # BA 582702
Assignment # 02
Topic =
How Does an Organization Work Out the
Labor Costing?

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ACKNOWLEDGEMENT
All gratitude and thanks to almighty “ALLAH” the gracious, the
most merciful and beneficent who gave me courage to
undertake and complete this task. I am very much obliged to
my ever caring and loving parents whose prayers have enabled
to reach this stage.
I am grateful to almighty ALLAH who made me able to
complete the work presented in this report. It is due to HIS
unending mercy that this work moved towards success.
I am highly indebted to my course instructor for providing me
an opportunity to learn about the “which is vital ingredient” of
MBA program. I am very grateful to my teacher (Sir Muhammad
Abdullah) for providing me guideline for the completion of this
report.
I feel great pride and pleasure on the accomplishment of this
report.

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ABSTRACT
This report is the Practical part of the most vital practice of our
MBA-Marketing program. The sole objective of my activity is to
familiarize with the practical manipulation of business
organization. This report has been written to know how big
organizations like Bata Pakistan Limited manage their teams
to achieve their common goals.
In the first phase of the report there is the general introduction
about the company and then different terms have been
explained, then the mission, values, different services and
different strategies of the organization have been explained. In
the next part, SWOT analysis of the firm have been done by the
help of which it is identified that what are the strong areas of
the company and where it lacks so that it can improve, and
then in the end most important my experience while visiting in
the Bata Pakistan Limited.

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DEDICATION
This report is dedicated to the greatest man in the
world that shows us the right path. Who is the
great patron of the mankind that is Holy Prophet
Hazrat Muhammad (PBUH).
I would also like to dedicate this small effort of
extract to my Parents and Teachers. They have
always been a shining star to look upon, to give
light and to show me the directions whenever I am
lost. May Allah give them more strength and long
life to guide me forever. Ameen!

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Table of Contents
Introduction of Topic 06
Practical Review of Company 10
Vision Statement 11
Mission Statement 11
Application of Topic 12
SWOT Analysis 13
Conclusion 14
Recommendations 14
References 14

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Introduction of Topic:
How Does an OrganizationWork out the
Labour Costing?
Labour cost is one of the important elements of production. Wage,
Salaries andother incentives of employee remuneration constitute a very
large component of operatingcosts. Remuneration of employees is a
vital factor not only affectingthe cost of production but also industrial
relations of the organization.
No organizationcan expect to attract and attain qualifiedand motivated
employees unless it pays them fair remuneration. Employee
remuneration. Therefore. Influences vitallythe growth and profitabilityof
the company. For employees. Remuneration is more than a means of
satisfyingtheir physical needs. Wages and
Salaries have significantinfluence on our distribution of income.
Consumption. Savings. Employment and prices. Thus. Employee
remuneration is a very significantissue from the viewpoint of employers.
Employees and the nation as whole.
Objectives of an Ideal Wage System
An ideal wage system is requiredto achieve the following objectives:
(1) The wage system should establish a fair and equitable remuneration.
(2) A sound wage system helps to attract qualifiedand efficient worker
by ensuringan adequate Payment.
(3) It assists to improve the motivation and moral of employees which in
turn lead to higher Productivity.
(4) It enables effective control of labour cost.

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(5) An Ideal wage system helps to improve union-managementrelations.
It should reduce Grievances arisingout of wage inequities.
(6) It should facilitate job sequences and lines of promotion wherever
applicable.
(7) An ideal system seeks to project the image of a progressive employer
and to comply with legal Requirements relatingto wages and salaries.
Principles of an Ideal Wage System
The followingprinciples shouldbe adopted for an ideal wage system
(1) Differences in pay shouldbe based on differences in job
requirements.
(2) Follow the principle of equal pay for equal work.
(3) The scheme shouldbe based on work study, and the work contents
of various jobs should be stabilized.
(4) Recognize individualdifferences in abilityand contributions.
(5) The scheme shouldnot be very costly in operation.
(6) The scheme shouldbe flexible.
(7) The scheme shouldencourage productivity.
(8) The scheme shouldnot undermine co-operation amongstthe
workers.
(9) The scheme shouldbe sufficientto ensure for the worker and his
family reasonable standardof living.
Method of Remuneration
There are two basic methods of wage payment:
(1) Time Wage System and (2) Piece Wage System.
Under time wage system. Wages are paid on the basis of time spent on
the job irrespective of the amount of work done. This is known as Time
Rate or Day Wage System. The unit of time may be a day, a week, a
fortnight or a month. Under piece wage system, remuneration is based
on the amount of work done or output of a worker. This is known as
"Piece Rate System" or "Payment by Result." Thus. A workman is paid in
direct proportion to his output. A varietyof bonus and premium plans
have been designed to overcome the drawbacks of two basic methods
of wage payments. A system of incentive plans also takes into

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consideration the primaryprinciples of these two basic plans known as
Incentive or Bonus or PremiumPlan.
The followingare the important methods of remuneration whichmay be
grouped into:
(1) Time Rate Systems.
(2) Piece Rate Systems.
(3) Bonus System (or) Incentives Schemes.
(4) IndirectMonetary Incentives.
(5) Non-MonetaryIncentives.
These may be further classifiedas under:
(1) Time Rate Systems: This is also termed as "Day Wage System" or
"Flat Rate System." Under this system, wages are paid to the workers on
the basis of time spent on the job irrespective of the quantity of work
producedby the workers. Payment can be made at a rate per day or a
week, a fortnight or a month.
(a) At OrdinaryLevels
(b) At High Wage Levels
(c) GuaranteedTime Rates.
(2) Piece Rate Systems: This is also known as "Piece Wage System" or
"Payment by Result." Under this system, wages of a worker are calculated
on the basis of amount of work done or output of a worker. Accordingly,
a worker is paid in direct proportion to his output.
(a) Straight Piece Rate
(b) Piece Rates with GuaranteedTime Rate
(c) DifferentialPiece Rates:
(i) Taylor's Differential Piece Rate System
(ii) MerrickDifferential Piece Rate System
(iii) Gantt Task and Bonus Plan.
(3) BonusSystem or Incentive Schemes: Incentive schemes of wage
payment are also known as PremiumBonus Plans. Introduced in order to

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increase production with ensuringproper industrial climate. Wage
incentive plans may be of two types:
(1) Individual Incentive Plans and (2) Group Incentive Plans.
Under individual incentive plans, remuneration can be measured on the
performance of the individual worker. In the case of the group incentive
scheme earnings can be measuredon the basis of the productivity of the
group of workers or entire work force of the organization. Various types
of incentive schemes are combinations of time and piece rate systems.
(1) Individual incentive plans
(1) Halsey PremiumPlan
(2) Halsey-Weir PremiumPlan
(3) Rowan Plan
(4) Barth Variable Sharing Plan
(5) Emerson EfficiencyPlan
(6) Bedaux Point PremiumSystem
(7) AcceleratingPremiumPlan
(8) Group or Collective Bonus Plans.
(2) Types of GroupIncentive Plans
(1) Budgeted Expenses Bonus Plan
(2) Priest Man Bonus Plan
(3) Towne's Gain-sharingPlan
(4) Scanlon Plan.
(4) Indirect MonetaryIncentives: Incentive schemes are regarded
beneficial to both employers and workers. In this regard, under indirect
monetary incentives by givingthem a share of profit and introducingco-
partnershipschemes or as they have become partners in the business in
order to make a very profitable enterprise.
(1) Profit Sharing
(2) Co-partnership.
(5) Non-MonetaryIncentives: Under this system, employees are
provided better facilities, insteadof additional monetary payments.
Some of the examples of non-monetaryincentives are free education for

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children, rent free accommodation, medical facilities, canteen facilities,
welfare facilities, andentertainment facilities etc.
Practical study
Bata Pakistan Limited
Since 1942 Bata Pakistan has been renderingits services to its valued
customers by offeringquality products. It was incorporatedin Pakistan
as Bata Shoe Company (Pakistan) Limitedin 1951 and went public to
become Bata Pakistan Limited in the year 1979.Since its inception, the
company has not only maintaineda good reputation of manufacturing
high qualityfootwear for all segments but has also been designingshoes
in accordance with the changingfashions andtrends. Bata Pakistan is
servingits valued customers through a strong retail network comprising
of more than 400 retail outlets, 467 registeredwholesale dealers, 13
wholesale depots, 28 wholesale distributors and 41 DSP wholesale
franchise across the country. Besides cateringlocal market, Bata Pakistan
also shows its presence in an international footwear market through its
export department which is constantlyexploringnew potential market in
order to earn foreign exchange.
Being a multinational companyBata Pakistan has played a vital role in
the economic progress of Pakistan. It has introducedsophisticated

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technologyand business skills to the country and provided directand
indirectemployment to about 10,000 people. Along with its own
manufacturingcapacityBata Pakistan is also outsourcingits products
nationally and internationally to meet the demands of its valued
customers. As the corporate social responsibilityis an integral part of
every business and Bata Pakistan fulfills its CSR by patronizingvarious
charitable organizations andalso take part in rehabilitationof society
duringthe natural disasters.
Moreover Bata Pakistan is also operatingan international programunder
the name of Bata Children program, which aims to create a brighter
future for the children of the community in which we operate. Under this
program Bata Pakistan encourages andsupports under privileged
children by providingshoes, donations and also arrangingdifferent
healthyactivities for them which add values in their lives. Bata has always
been the market leader and in order to maintain its leadershipit has
invested millions of rupees in updating its systems and equipment
duringthe last few years. This will enable the company to expand,
modernize and develop its operations and in the process provide
additional employment opportunities. Bata the market leader is well
equipped to cater the customer’s demands and to meet future
challenges.
Vision of the Foundation
To grow as a dynamic, innovative andmarket driven domestic
manufacturerand distributor, with footwear as our core business, while
maintaininga commitment to the country, culture and environmentin
which we operate.

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Mission of the foundation
To be successful as the most dynamic, flexible and market responsive
organization, with footwear as its core business.
Review of theoretical and practical
situation with respect to topic
Bata Industrials is a specialized division of Bata Pakistan Limited catering
to footwear needs of various industries and institutions. Large industries
and private/public institutions are sold safety footwear for their workers
by Bata IndustrialsDivision directlyandthrough specializeddistributors.
Whilstcomfort and durabilityare essential properties of our footwear, we
provide special features like impact resistance, heat resistance, oil
resistance, lightweight etc. depending upon specific industry
requirements like steel, oil, cement etc. In addition, we provide excellent
quality canvas PT shoes, miner's shoes etc. to meet specific requirements
of army, police forces and mining industry. For corporate offices, we have
a selectedrange of regular wear occupational shoes for managementlevel
people working in an industry or construction environment. The single
overridinggoal is: To guarantee the wearers of our shoes optimum safety,
health and comfort. This philosophy has won Bata industrials an
outstanding reputation in the better class of safety footwear.
In Bata use the Method of Time based systems.
Worker SalaryAverage is 15,000 Per Mouth.
Overtime is Also Given on Average Basis.
Incentives is 4 Bonus in one Year.
Sick Leaves and Causal if they didn’t entertain with leave whole year
company give them rupees and on leaves equal to average salaryand
average is calculatedwith 5 weeks back salaryand give accommodation
and medical.

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SWOT Analysis
Strength
 Professional and well trained Labour.
 Wider space for healthy work.
 Stronger ambition.
 Higher Cooperative Workforce.
Weaknesses
 Difficult to maintain same environment in each Department.
 Low job satisfaction.
 Loss of Cost When Hire New Labour.
Threats
 Offer Competitive Wages & Benefits.
 Leak the Information & Polices When Labour Leaves.
Opportunities
 Bata HR Department Makes Back Up Systems when Employee
Leaves an Organization.

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 Supervisor Makes Good Relation with Labour to Work Better.
 Level up the Wages Slabs for UntrainedLabour.
Conclusion
This internshipproved to be very helpful for me. It was my first
experience, which was obviouslyvery tough, but it will be very beneficial
for in my coming future.
As a whole Bata is a good organization to work in but there are certain
departments that need improvements. It is survivingin the Factory sector
with some strengths and weaknesses. I am of the view that if the
managementof Bata should have to take some decisions before time,
because in the 21st centuryonly those organizations can survive who are
utilizingall their resources efficientlyandeffectively.
Recommendations
 The management should try to decrease job insecurity among the
Labour.
 Training program should be started for internees and newly
appointed Labour.
 There should be transport facility for the Labour.
 The number of Labour shouldbe increasedin order to decrease the
workload.
References:

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www.bata.pk
www.kse.com.pk
www.lse.com.pk
Personal observations
Wikipedia
Relevant text book of AIOU
Discussion by Bata Branch Manager
Teacher discussion