Accounting for labour can be classified into labour costing for managers and payroll accounting. For labour costing, source documents like job cards, clock cards, timesheets, and wage sheets are used to track employee time and calculate labour costs to charge to jobs and overhead accounts. Payroll accounting records amounts owed to employees and tax/pension funds. Common incentive schemes that pay bonuses for productivity include Halsey, Halsey-Weir, and Rowan schemes. Idle time represents unpaid time and is classified as normal or abnormal, with normal time charged to overhead and abnormal time investigated. Controlling idle time involves proper planning, maintenance, and supervision.

1. ACCOUNTING FOR LABOUR(LABOUR COSTING)
Accounting for labour can be classified into 2categories namely: labour
financing information for managers and payroll accounting.
 Labour financial information for managers is concerned with
identifying the amount of labour cost to be charged to individual jobs
and overhead accounts.
 Payroll accounting on the other hand is concerned with the recording
of the amount due to employee, the inland revenue or the pension
funds etc.
 In labour financial information for managers, source documents are
prepared to provide basic information relating to the time spent on
the job or the output produced.

2. Labour costing cont’d
This information is used to calculate the labour cost.
Where a manufacturing organization operates a job costing system,
such information can be obtained from the following documents;
1. Job card- this is the record of time spent on the job. Where a worker
commences a job, the foreman or timekeeper will enter the time at
which he starts the job on the card. When the job is completed, the
finishing time is entered on this same card, the hourly rate of pay is
applied and the labour costs can then be calculated.

3. Cont’d
2. Clock cards- a clock card is a document on which time is recorded;
the starting and finishing time of the employee to ascertain the total
actual attendance time. Both types of workers (direct and indirect
labour), will be supplied with clock cards on which to record, their
arrival time and departure time from the factory. Such reports provide
a basis for wages calculation at time rates.
3. Idle time cards- this may be used to record the amount of idle or
waiting time if a productive worker is not occupied for a short period
say because of; machine break down, or he/she is waiting to start the
next job.

4. Cont’d
4. Time sheets- a timesheet is a record of how a person’s time has
been spent. Daily or weekly timesheets on which the employee enters
all particulars himself are commonly issued to indirect workers e.g.
maintenance staff. The worker enters his clock number, name and cost
centre at the head of the sheet and details of the work upon which he
is engaged together with starting and finishing times are entered in the
appropriate columns of the form.

5. By contrast to the job cards in the system mentioned above, a
timesheet provides a complete record of how an employee has spent a
working day or week. On the other hand, a disadvantage of using a
timesheet is that they tend to be entered half at the end of the day or
week rather than at the time when the job was started or finished.
The timesheets are not as accurate as individual job cards which have
to be returned to the office immediately the worker has finished the
job.

6. Cont’d
5. Wage sheet/payroll- all employee are listed on the wages sheet
alphabetically or in accordance with the serial numbers. The hours
worked by each employee are entered on the wages sheet from the
clock card and multiplied by the pay rate. It contains Gross pay,
overtime pay, bonus and any other allowances and deductions such as
NSSF,PAYE, and advances and finally the Net pay.

7. Sample wages sheet

8. Cont’d
6. Employee record card- this contains the basic information about the
employees. The card is raised when the employee is still engaged and
shows the history of the employee during his life time in the
organization, hours, date of appointment, title, rate of pay, promotions,
transfers and date of departure.
7. Piece work tickets- these are used where the employees are paid on
the piece rate basis. They contain details of the number of items
produced by each employee and this is multiplied by the rate per item
to give the total weekly wage.

9. Labour remuneration methods
There are 2 basic approaches to remuneration.
Time related or output related. People are either paid according to the
length of time spent working or according to how efficiently they have
worked i.e. time rates and piece rates.
1. Time rates, this means that employees are paid a basic pay rate per
hour, day, week irrespective of the production achieved. Basic time
rates provide no incentive to improve productivity and close
supervision is necessary. So bonuses or commissions are often paid to
encourage efficient working.

10. Methods cont’d
2. Piece work- piece work is where a fixed amount is paid per unit of
output achieved irrespective of time spent. Rigid inspection procedures
are required to ensure work is of an adequate standard.
variation on the basic theme is the differential piece rate. This is almost
incremental system, a low piece rate for the 1st units of production and
a higher piece rate for the subsequent units of production.

11. INCENTIVE SCHEMES
Modern managers recognize the need to motivate the workers to do
the job, others coerce them. They do this by using incentive schemes
among which are premium bonus schemes or plans.
Premium bonus plans pay a basic time rate plus a portion of the time
saved as compared to some agreed allowed time. Examples of
premium bonus schemes include: Halsey scheme, Halsey Weir and
Rowan scheme.

12. Schemes cont’d
• Halsey plan (scheme). The employee receives 50% of the time saved
as
• Halsey weir plan (scheme). The employee receives 33% of the time
saved i.e.

13. Cont’d
• Rowan scheme. The proportion paid to the employee is based on the
ratio of the time taken to the time allowed.

14. Illustration
• Employees basic rate 100 per hour
• Allowed time for job A 1 hour
• Time taken for job A 30 minutes
Required: calculate the basic pay and the bonus under the Halsey,
Halsey-weir and Rowan schemes.

15. Exercise
The following data relates to a company which employs 5 skilled
workers to produce a product.
Hourly rate of wages 3,000
Average time allowed for producing a unit of product by one worker
4hours
No. of working days in a month 24 days.
No. of working hours per day for @ worker 10hrs
Actual production during the month 1,000 units
Required: the bonus under the 3 bonus schemes, basic pay and gross
pay

16. IDLE TIME
Idle time represents time lost by workers.it actually represents the time
for which workers are paid but no production is obtained. For example,
the time lost between factory gate and department, time when
production is interrupted by machine maintenance, tea breaks,
machine break down, power interruption etc.
Causes of idle time.
1. Productive causes
2. Administrative causes
3. Economic causes.

17. Productive causes
• Idle time due to machine break downs
• Power failures
• Waiting for tools and/or raw materials
• Waiting for work
• Waiting for instructions
Idle time due to productive causes is usually controllable by proper
planning, strict supervision and maintenance of plant and machinery.

18. Administrative causes
Idle time is sometimes caused by administrative decisions thus, when
there is surplus capacity of plant and machinery which the
management decides not to use, there may be some idle time due to
administrative decision. This usually happens during depressions when
some of the machines have got to work below normal capacity and
regular workers are paid full amount of wages. This is because the
management does not want to get rid of trained workers temporarily.

19. Economic causes
Idle time can be caused by fall in demand of products, say due to
severe competition, seasonal nature of certain industries like woolen
goods, ice industry etc. where production can’t be evenly distributed
throughout the year. In such cases, it is not possible to get rid of
workers during slack season.

20. Measurement of idle time.
• Idle time is classified as normal and abnormal.
The cost of normal idle time is treated in the following two ways;
a) It is charged to factory overheads
b) Wage rate may be inflated so as to make allowance for normal loss
of labour time. Thus, if worker’s production time is only 7 hours
during an 8 hours day and his hourly rate of pay is shs. 300, the
inflated wage rate will be; 8/7 * 300 giving 343.

21. Abnormal idle time
• This is that idle time which arises due to reasons not connected in any
way with the routine of manufacture and for which the employer
must pay. Abnormal idle time is attributable to defective planning,
inefficiency or bad luck.
• Payment for such idle time is not included in cost and is adjusted
through costing profit and loss account.

22. Control of idle time
The following steps may be taken to control idle time.
 Production should be properly planned so that imbalances in
production are avoided or reduced.
 Repairs and maintenance of plant and machinery should be regularly
undertaken so as to avoid breakdown.
 Raw materials, tools and instructions should reach the worker well in
time so that no time is wasted in their waiting.
 Supervision should be tightened.
NB: Overtime occurs when a worker works beyond normal working
hours. There is always an overtime premium.

23. Labour turnover
In all business organizations, it is a common feature that some workers
leave the employment and new workers join in the place of those
leaving. This change in workforce is known as labour turnover. Labour
turnover is therefore the rate of change in the composition of the
labour force in the organization.
Measurement of labour turnover:
To facilitate comparisons between different periods and different
undertakings, labour turn over may be expressed in a rate of
percentage.

24. Methods of computing labour turn over rate
1. Separation method- this method takes into account only those
workers who have left during a particular period.
The formula is; No. of workers left during a period X 100
average no. of employees during period
Average number of employee

25. Cont’d
2. Replacement method. This method takes into account only those
new workers who have joined in the place of those that have left. Its
formula is;
Note: if new workers are engaged for expansion programme or any
other such purposes, they are not considered for this computation.
3. Flux method. This shows the total change in composition of labour
force due to separations and additions (replacement) of workers.

26. Cont’d
Formula for flux method
Example: Oxalis company ltd supplies you the following information.
No. of workers on 1st April 2015 400
No. of workers on 30th April 2015 500
No. of workers resigned 35
No. of workers discharged 10
No. of replacements (new workers) 40
Required: calculate the LTO rate using the 3 methods.

27. Activity
 Causes of labour turnover, they may be economical, social, political
and religious.
 Costs of labour turnover in an organization. These may be positive
and negative effects of labour turnover in an organization.