Mohamad Ridhuan Bin Mat Dangi 2011

All people recruited must be matched with the right job, trained, paid at a reasonable wage, motivated, and appraised.

Labor is a major cost in all organizations.

The workers in the company must be compensate in order to appreciate them as a reward to the contribution of company profit and performance.

Definition – direct labour is the cost of remuneration for employees’ efforts and skills applied directly to a product or service and can be identified separately in products costs.

Directly involved in the production of the goods and services.

For example: in the restaurant the direct labour cost incurred to the cooks, kitchen helpers, food tester, nutritionist , etc.

Other example: education, factory, etc.

Labour is only classified as direct when:

1. There is direct involvement/ relationship to the product/output – physical connection/association

2. The labour cost can be measured- measurabil i ty

3. The labour cost is sufficiently material in amount- materiality

Definition- refers to the wages which cannot be identified with a particular product or service and need to apportion the costs between two or more products.

Indirectly involve in the production and more related to the supporters to the organizations performance.

For examples: service departments ( cleaners, maintenance workers, storekeepers, security guard, machine cleaners), production department ( foreman, inspectors, supervisors, forklift and crane drivers, etc)

A record of time is required for all hourly employees and also for salaried workers if they are paid overtime and known as timekeeping.

Objectives of timekeeping is to provide the necessary information that enable the payroll department in order:

1. To calculate and prepare the payroll

2. To be used by accounting department for payment purposes whether direct or indirect labour.

3. To analyze the times spent for costing purposes

4. For planning and control purposes.

Is also known as timekeeping

Help to provide a record of time spent in a factory and also is form of attendance record.

The method for time recording used is punch card/ clock cards. This card will be an evidence to the workers who do overtime or late departures.

To control this method, the company can assign the security guard to ensure the workers do not help to stamp each other’s card.

Is a form of timekeeping to record the time spent on a job or operation in the factory.

This information should be able to be reconciled with the time recorded in the punch card/clock card.

Types of time booking is:

1. Daily time sheet and weekly time sheet2. Labour cost card/job card3. Operation card

The employee can either use daily time sheets or weekly time sheets

The objective is to reconcile the time recorded in the punch card with time booking to jobs or operations

Weekly time sheets can reduce the volumnous records of daily time sheet.

Is used to find out the labour time spent on each order/job. It is prepared separately for each job/order.

The card will move from worker to worker as the job progress and it will have a record of time spent by each order or labour hours spent on an order/job.

Each card will contain the total number of hours worked on a particular order/job.

It is used for costing labour of a job and is not used for wages calculation.

The card is provided for each stage/operation of manufacture.

Single job will have a number of operations cards.

Definition- remuneration is the reward for labour and service.

There are two types of remuneration:1. Time based scheme2. Output scheme/individual scheme

Is a method of payment based on time which is based on per hour, per day, per week or per month basis.

There are two time based scheme which is Basic Scheme and High Day Rate Scheme.

Basic Scheme – earnings are calculated based on the number of hours spent at his/her place of work.

If he work more than his basic working hours, it will be consider as overtime

Overtime hours are usually paid at a higher rate such as 1 ¼ times, 1 ½ times or 2 times higher and sometimes it may be increase into 3 times on public holidays and weekends.

This scheme is suitable for a job with the high degree of skill and quality are needed.

Overt ime Hours = Hours Worked – Basic Working Hours

Gross Wages = Hours Worked x Rate Per Hour

Advantages:1. It is widely used, simple to implement and not much clerical

work2. All employees is easy to understand3. The quality of work will be increase

Disadvantages:1. A worker will try to slow down production to increase his

wages in order to increase wages by completing their work during overtime

2. Efficient and inefficient workers are paid the same3. Dissatisfaction may be arise among the efficient workers

Is designed to provide a strong incentive to good workers by paying rates well above the normal rate.

The high wage rate is offered in return of high standard of performance and output.

The wages costs may increase but it can help to reduce the labour cost and overheads cost

Advantages:Advantages:1. Simple to implement and administer2. Able to attract higher grade workers3. Dissatisfaction among good workers is likely to

reduce

DisadvantagesDisadvantages1. High output and high quality is difficult to achieve

and maintain

Is an incentive scheme which relates payment to output such as the more workers can produced the more they will be paid.

The characteristics of this scheme is:

1. The standards of performance should be achievable

2. Remuneration should be made immediately after the task is completed

3. The standard set should not be changed too often

Advantages:Advantages:1. Increase the production helps to reduce overhead cost

per unit2. Helps to improve morale because effort is rewarded3. Helps to attract more efficient worker in order to

increase their income

Disadvantages: Disadvantages: 1. Problem in setting the achievable standards that can

satisfy the employees2. Some schemes may be difficult to administer.

Earnings are related to effort and varies with the rate of production.

Advantages: Advantages: 1. Simple to calculate and easy to understand2. High production rates result in reduced overhead cost per

unit

DisadvantagesDisadvantages1. Quality may suffer and increase production costs2. Trainees and inexperienced workers are penalized3. No minimum wages.

Gross Wages = Number of units Produced x Rate Per Gross Wages = Number of units Produced x Rate Per UnitUnit

Provides security for employees receiving low wages due to sickness, delays, machine breakdowns, tool breakage, shortages, etc.

A minimum wage is determined first and normally based on the basic scheme.

Advantages: Advantages: 1. Workers will be more secure with the minimum wage.

DisadvantagesDisadvantages1. Company need to liable a lot of cost even there is no

contribution by workers

This method is implement in order to overcome the problem of “inverse labour supply curve”. This is happen and true when the income level of the employee is high.

Differential piece rate method encourages workers to increase production further by offering an increased rate per unit at different level of production.

Advantages: Advantages: 1. Increase the morale of workers in order to improve their

works to achieve a good levels of rate per unit

Disadvantages:Disadvantages:1. It may increase dissatisfaction to the inexperience workers.