LABOUR AND WAGE ANALYSIS

At the end of the unit you will be able to :

  1. Explain the procedure of

employment and retirement2. State the causes of employees

leaving the company 3. Calculate the labour turnover rate4.Explain the method of recording

labour time 

The Engagement Of Labour 

The engagement of labour is delegated by the management to the personnel officer. The personnel officer carries out this work in response to a properly authorized request for employees received from departmental manager.

  The procedure upon engagement of labour is as

follows :   Notice is given to the department concerned.

When the employee reports for duty he sees the personnel officer and is given a copy of the work rules.

Notice is given to the wages office. This notifies them of the new employee’s name, the date of commencement, department, rate of pay and clock number.

TERMINATION OF EMPLOYMENT  When an employee leaves his

employment for any reason, the personnel officer should seek to find out that reason. The employee should give a prior notice for resignation.

WHAT IS THE REASON OF QUITTING ?

COST OF LABOUR TURNOVER

Preventive Costs

 Preventive costs include all the costs which are incurred to prevent workers from leaving the organisation and keeping them satisfied.

Example : ??

Replacement Costs Replacement costs include the costs which are incurred for the recruitment and training of new workers.

Examples : ??Are u ready to proceed…?

Examples of preventive costs :

a). A personnel departments incurs costs on recruitment, selection, training and other things related to employment.

b) The cost incurred for providing medical benefits to the worker.

c) Welfare include facilities like sports, transport, canteen and housing.These facilities will prevent workers from leaving.  

Some examples of replacement costs :

a). The increase in costs of the personnel department due to the recruitment of new workers.

b). The lost of production time as the new workers need to be given training.

C). The inefficiency of new workers and will affect production.

d). Costs of breakages of tools and equipment due to inexperienced workers.

LABOUR TURNOVER RATE Any changing of employees cause loss to a manufacturer.

Labour turnover is the rate at which employees leave employment at the factory.

Labour turnover can be calculated as below as :  The average of employees leaving + replace for the year X 100 The average number of employees for the year **

**(The no of employee at beginning of period + the no. of employees at the end of period) / 2

Example 5.1 :  This information is extracted from Number One Company relating its employees for the year ended 2009 :The number of employee employed on 1.1.2009 is 120. During the year, 24 new employees were employed and 18 left.

You are required to calculate :a. The number of employees on 31.12.2009b. Labour turnover rate 

Solution to Example 5.1  The number of employees on 31.12.2009No. of employees at 1.1.2009120+ New employees24- Employees left 18

126Labour turnover rate = (24 + 18 )/2

---------- X 100%

(120 + 126)/2 = 17.07%

 

Lets try out some exercise :Question 1 :

Dept. X Dept. Y

No. of employee at the beginning of the period

72 34

The addition of employee during the period

14 9

No. of employees leaving during the period

11 7

You are required to calculate :a. The number of employee at the end of the periodb. Labour turnover rate for each department

Try out more exercise in your module…pg 10

And pg 21

TIME KEEPING RECORDS

1. Time Based- based on punch card report

2. Output record

a) Daily and weekly time sheets. These are records, filled in by the

worker and countersigned, which show how he spent his time during the day.

 

b) Job cards. A job card relates to a single job or batch and is likely to contain entries relating to

numerous employees.

c) Operating cards. These cards are also known as piecework tickets, are provided for each operation. So each operation will have at least one card.

Refer to your module for sample of time sheet, job cards and Operation

Card

1.Remuneration : Time Based Employee paid based on working

hours Eg : Alan worked for 40 hours /week.

Hourly rate of pay is RM 1. Calculate his gross salary.

Solution :Gross salary = 40 h x RM 1 = RM 40.00

2.Remuneration : Piece Work Employee paid based on units

produced/output The more he produce, the more he will get

the salary Eg : Alan produced 100 units. He will be paid

RM 1/unit.

Solution :Gross salary = 100 units x RM 1 = RM 100.00

2.Remuneration : Piece Work ( cont.) Company can varies the piece work scheme

in order to increase production.

a). Piece Work with guaranteed daily rateEg : Alan produced 38 units. Guaranteed minimum rate is RM 40/day when the output is less than 40 units/day. Rate/unit is RM 1. Calculate the gross salary if :* production unit = 40 units * production units = 50 units

2.Remuneration : Piece Work ( cont.)

b). Differentiated Piece Work RateExample 1 : Alan produced 200 units. He will be paid as follows :Up to 100 units = RM 0.50/unit101 – 150 units = RM 0.60/unit151 – 200 units = RM 0.70/unit Calculate the gross salary

Example 2 : Alan produced 180 units. He will be paid as follows :Up to 100 units = RM 0.50/unitEvery next 50 units will increase RM0.20/unit.Calculate the gross salary

Question 1:

Azira Shariza ZarizaUnit produced 300 280 240Time taken (hour) 26 32 30Hourly Rate of Pay RM1.15 RM1.20 RM1.25Rate/Unit (RM) RM0.15 RM0.20 RM0.30Time allowed/unit 7 minute 9 12

Calculate :Basic pay for each worker based on :a. Hourly rate of payUnit based

Question 2:

Below are the information regarding 2 workers for a week. Total working hours is 40 hours.

Hadija HaziraHRP RM3.20 RM2.75Output 180 150

Calculate wages based on :a. Working hoursb. Piecework at RM0.75/unitc. Differentiate piecework based on rate :

up to 100 units – RM0.60/unit101-150 units – RM0.90/unit151 units and above – RM1.20/unit

3. Incentive Scheme

What is incentive scheme ?Bonus will be paid for saved timeSaved time = Allocated time – time takenSome of the incentive scheme :1. Individual bonus scheme2. Group bonus scheme3. Profit sharing scheme

3. Individual Bonus Scheme

Under this scheme an employee is paid a basic rate per hour. If he completes his work in less than the ‘standard or expected time’, he earns a bonus.

These scheme are : i. Halsey ii. Halsey-Weir iii. Rowan

i. Halsey

Formula : Bonus = 50% x time saved x hourly rate of pay (HRP)

Example : Amer is paid Rm2.00 per hour for an 8-

hour day. In one day, he completes his job with standard times of 12 hours. Calculate his wages.

ii. Halsey-Weir

Formula : Bonus =33 1/3% x time saved x hourly rate of pay (HRP)

Example : Encik Kamil is paid RM1 per hour. Time

allowed is 50 hours. The time taken by him is 40 hours. Calculate his basic pay, bonus and his gross wage.

iii. Rowan Formula :

Bonus = Time taken x time saved x HRP

Time allowed Example 1 : Encik Kamil is paid RM1 per hour. Time allowed is 50 hours.

The time taken by him is 40 hours. Calculate his basic pay, bonus and his gross wage.

Example 2 :

Mimi is paid RM2.40 per hour and is given a job which has a standard time allowed of 12 hours what should be her bonus pay for the job, and total rate of pay per hour if the job takes 9 hours.

GROUP BONUS SCHEME

Example 1 :

Standard production in Factory XYZ is 24 units of bicycle per week. The Assembly Dept have 10 workers. If the production increase for 20%, bonus for RM60 will be paid.

On the 10th day, 30 units are produced. Calculate bonus/worker.

Answer :

Increment (%) = 30 - 24 x 100% = 25%24

Group bonus = 1.25 x RM60= RM75

Bonus/worker = RM75/10 = RM7.50

Example 2 :

Assembly Dept for Factory ABC have 5 workers. Standard production is 5 units/day. If the team can produce 8 units per day, bonus for RM80 will be paid.

On the 2nd and 3rd day, the team were produced 12 units and 15 units respectively.Calculate bonus/worker.

Answer :

Day 2 :Increment (%) = 12 - 5 x 100% = 140%

5Group bonus = 2.40 x RM80

= RM192

Bonus/worker = RM192/5 = RM38.40

Day 3 :Increment = (15-5)/5 x 100%

= 200%

Bonus = 3 x RM80 = RM240

Bonus/worker = RM240/5 = RM48.00

Exercise :

Glass Manufacturing Pvt Ltd has 4 group of workers that is Group 1, Group 2, Group 3 and Group 4.. Each group has 5 workers with hourly rate of pay is RM4.00.

Normal working hours for each worker is 8 hours per day for 5 days per week. Expected time ( standard time ) to finish an order for the groups is 65 minutes, 70 minutes, 70 minutes and 75 minutes respectively.

Standard time for an order is 10% more than the average of expected time taken by each group.

For Week 1 in January, Group 2 completed 40 customer’s order.

Calculate gross pay that will be received by a worker in G2 if the company practiced the following method of remuneration :

a.Incentive on time saved at RM5.50/hb.Incentive based on Rowan Bonus Schemec.Incentive based on Halsey Bonus Scheme

Answer :

Standard time for 1 order from customer :Average = (70+65+70+75)/4 = 70 minutes

10% more :110% x 70 minutes = 77 minutes

40 orders :77 minutes x 40 = 3080 minutes

= 51.33 hours

Time saved = 51.33 – 40 = 11.33 hour

a.

Basic pay = 40 h x RM4 = RM160.00Incentive = 11.33 h x RM5.50 = RM62.32

RM 222.32

b. Basic = 40 h x RM4 = RM160.00Bonus = 40/51.33 x 11.33 h x RM4 = RM 35.32Total RM 195.33

c. Basic = RM160.00Bonus = 50% x 11.33 h x RM4 = RM22.66Total wages RM182.66

OVERTIME

•Working hours is MORE than normal working hours•Example 1 :

AN operator had an OT for 4 hours. He will be paid on the rate of 1.5 for his OT. How many hours will be paid as his OT.

Solution :OT = 1.5 x 4 h

= 6 h

Example 2 :

AN operator worked for 4 hours as OT. Normal working hours is 40 hours. HRP is RM1.00. OT rate is 1.5 as per stated in offer letter.

Calculate :a.OT premiumb.Total salary

Solution :

a.Premium OT = 0.5 x 4 h x RM1.00 = RM 2.00

b.Total salary Basic salary = 40 h x RM1.00 = RM 40.00OT = 1.5 x 4 h x RM1.00 = RM 6.00Total salary = RM 46.00

Exercise :

HH Pvt Ltd is a factory producing car components is Semambu. This company has 30 workers in operational lines. HRP is RM 3/h with basic working hours 40 hours/week; with each worker is paid with guaranteed wages scheme RM120/week. If necessary, OT are allowed up to 15 h per week for each worker. This OT is paid at the rate of 2.5.

Currently, standard time of car components is 6 units per hour for each worker. Recent study showed that each worker can actually produce more ie up to 8 units / hour. Hence, a new remuneration scheme will be implemented. The company will implement piece work remuneration scheme at RM0.55/unit.

Range of production based on Budgeted Production Schedule are from 7000 units to 9900 units /week( maximum).Selling price is RM10/unit. Raw material cost at RM8/unit and total fixed overhead per week is RM9000.

You are required to advise the management about the remuneration scheme applied.

You are required to :

a.Calculate labor cost that will be incurred at minimum production unit 7000 units and maximum production 9900 under both scheme ( existing and proposed new scheme)

b.Give advise to the management regarding the remuneration scheme. Why?

Solution :EXISTING SCHEME :7000 units 9900 units

1 h – 6 units40 h – 240 unit/worker30 workers – 7200 units( 7000 units not achieved minimum production)Paid under guaranteed scheme

Basic salary = RM120/worker x 30 = RM 2600

6 unit – 1 h9900 unit - ? H = 1650 h ( for 30 workers )1 worker = 55 h

OT involved

Basic = 40 h x 30 workers x RM3/h = RM 3 600

OT = - OT = ?2.5 x RM3/h x 15 h x 30 workers= RM 3 375

Total salary = RM 2 600 Total salary =RM 3 600 + RM 3 375 = RM6975

PROPOSED SCHEME :

? ?

b). How to advise ?

Prove by total cost and effects on profit

b).Existing

Existing 7000 9900

Raw materials 56 000 79 200

Labor 2 600 6 975

OH 9000 9000

Total cost 67 600 95 175

Sales 70 000 99 000

Profit 2 400 3 825

Proposed Scheme

Raw materials 56 000 79 200

Labor ? ?

OH 9000 9000

Total cost ? ?

Sales 70 000 99 000

Profit ? ?