This document discusses various methods for rewarding and accounting for employee labor costs, including: time-based pay with overtime premiums; piecework pay based on units produced; bonus schemes for completing work faster than allotted timeframes; and group incentive schemes. It provides examples of calculating earnings under each method and addresses minimum wage, recording work hours, and treating overtime as a direct versus indirect cost. The overall aims are to understand different pay incentives and accounting for labor expenses.

1. LABOUR COSTS-Aims of the
Session
• To understand the different ways employees
can be rewarded financially
• To understand different incentive schemes
• To understand how to account for labour
costs

2. LABOUR REMUNERATION
• Time based where output varies, difficult to
measure and quality of output important
Eg Carol is employed by H Limited. She works a
basic week of 30 hours and is paid £8 per
hour. If she works overtime this is paid at a
premium of 50 per cent above her normal
hourly rate (this is known as ‘time-and-a-
half’). During the week ended 4 July she
worked 35 hours.

3. LABOUR REMUNERATION
• Time based where output varies, difficult to
measure and quality of output important
Eg Carl is employed by W Limited. She works a
basic week of 35 hours and is paid £9 per
hour. If he works overtime this is paid at a
premium of 50 per cent above her normal
hourly rate (this is known as ‘time-and-a-
half’). During the week ended 4 July she
worked 40 hours. What is he paid?

4. LABOUR REMUNERATION
 Monday 9 hours
 Tuesday 8 hours
 Wednesday 10 hours
 Thursday 10 hours
 Friday 8 hours
 Saturday 8 hours
If standard working week is 35 hours, and any
weekday overtime is time and a half, while it is
double time at the weekend, what is the wage if
standard rate per hour is £8/hour?

5. LABOUR REMUNERATION
 Monday 12 hours
 Tuesday 9 hours
 Wednesday 10 hours
 Thursday 10 hours
 Friday 10 hours
 Saturday and Sunday 8 hours per day
If standard working week is 40 hours, and any
weekday overtime is time and a half, while it is
double time at the weekend, what is the wage if
standard rate per hour is £9/hour?

6. PIECEWORK
• Output orientated.
• Eg Dave is employed on a part-time
basis by K Limited. He is paid £0.40 for
each unit he produces up to 100 units
per shift. Any units produced above this
target are paid at £0.50 per unit. Last
shift he produced 108 units

7. PIECEWORK
• Output orientated.
• Eg Ron is employed on a part-time
basis by A Limited. He is paid £0.50 for
each unit he produces up to 80 units
per shift. Any units produced above this
target are paid at £0.60 per unit. Last
shift he produced 103 units. What is he
paid?

8. PIECEWORK
• Number Amount per item
0-19 50p
20-29 60p
30-39 65p
40+ 70p
How much paid if produce 38 units per hour?

9. PIECEWORK
• Number Amount per item
0-29 70p
30-39 90p
40-49 105p
50+ 115p
How much paid if produce 58 units per hour?

10. BONUS SCHEMES
John is a skilled engineer, paid £12 per
hour. Each job he does has a time
allowance and he is paid 50 per cent of
any time he saves each week as a
bonus paid at his hourly rate.
During the week ended 11 July, John
worked for 40 hours and completed
jobs having a total time allowed of 47
hours.
What are John’s earnings?

11. BONUS SCHEMES
Fred is a skilled engineer, paid £15 per
hour. Each job he does has a time
allowance and he is paid 40 per cent of
any time he saves each week as a
bonus paid at his hourly rate.
During the week ended 11 July, Fred
worked for 39 hours and completed
jobs having a total time allowed of 49
hours.
What are Fred’s earnings?

12. GROUP INCENTIVE
SCHEMES
• Why– not possible to measure individual
performance, work in groups, production
integrated
• Advantages- non-production employees
included, team spirit, reduces admin. Time
• Disadvantages- lazy members, negotiating
terms, may demotivate

13. MINIMUM WAGE
• May be included when completing
piecework or when making sales (basic+)
• If Dave had only produced 50 units but
was entitled to a guaranteed minimum
wage of £30 per shift, he would receive
£30 even though his piecework
earnings were only 50 x £0.40 = £20.

14. RECORDING TIME
• Clock cards
• Flexible time workers
• Activity recording devices
• Timesheets

15. ACCOUNTING FOR LABOUR
• Overtime premium
• Bonus earnings
• Idle time
• Sickness
• Diverted hours
If overtime relates specifically to the
production of a particular unit then deemed
to be a direct cost

16. SUMMARY
You should now be able to:
Describe different labour costing methods
Calculate the labour cost using a range of
different methods
Explain the benefits and disadvantages of
the different methods
Understand how to account for labour costs