payroll management & accounting

8/6/2019 Payroll Management & Accounting

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April 16, 2011

Md. Maksudur Rahman, FCMA

Professor

Department of Accounting & Information Systems

University of Dhaka

Subject: Submission of the report title ''Payroll Management and Practices of

Epyllion Limited''

Dear Sir,

We are awfully pleased to put forward the report on ''Payroll Management and Practices of

Epyllion Limited''

This report is an indispensable part of the successful completion of our course Cost Accounting I

(3102). While making this report, we got familiar with multifarious characteristics and aspects of

a labor cost, factors and components of labor cost, motivational plans used by management,

preparation of payroll sheet which will be enable us to get familiar with practical aspects along

with our theoretical knowledge.

We tried our best to make this report look like a professional one and cover up all the related

information that help to make balance between personal life and the working areas. We do hope

that you will evaluate it with your own graciousness.

Sincerely Yours

Md. Kamrul Hasan

On behalf of the group


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Abstract

This report contains different aspects of labor cost and its calculation as well. This report is

prepared by collecting information through visiting and investigating. The company was visited

for the collection of information is Epyllion Limited. From the company information about

different components of labor cost, management and controlling of labor, accounting of labor

cost are collected and these are analyzed in a very systematic manner throughout this report. This

report also consist a payroll sheet which structure is provided by the company.


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Introduction

Epyllion' is a house of Readymade Garments and engaged in manufacturing and exporting of

knit Apparels since 1993. The Organization is a well structured one and manned by a group oftrained and professional managers at every level of management. The management of the group

is vested with a team of professionals under direct supervision of the Managing Director,

Executive Director, two General Managers, Factory and Production Managers, Departmental

Heads for each section, marketing, Administrative and a Production team of 1,075 skilled and

semi skilled workers. Mr. Reazuddin Al-Mamoon, Managing Director of Epyllion Goup' leads

the team of professionals under the direct supervision of the Board of Directors. A team of

qualified persons is assigned to check vigorously if the elements involved in the process to meet

the international standards. Computerization and Automation in the different departments of

Garments and Fabric manufacturing process with computer aided designing, digital color

matching and communication make the process accurate and eliminate the possible human error.

Epyllion Group has the following four industries.

1. Textiles Industries Epyllion Knitex Ltd. Epyllion Fabrics Ltd. Epyllion Knitwears Ltd.

2. Garments Accessories Epyllion Ltd. Epyllion Washing Ltd.

3. Garments Industries Epyllion Style Ltd. Epyllion Jeans Ltd. Dekko Knitwears Ltd. Dekko Knitwears Ltd. Unit-2 Mirabella Dresses Ltd.

4. Real Estate Nina Holdings Ltd.


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From the above company we have visited Epyllion Limited. Epyllion Limited' established in

February, 1996 is designed to be the manufacturer of packing and trimming materials for its

sister concern as a backward linkage. Is equipped with all modern machinery and capable of

producing 2,500 Square Meter (around 3 M. Ton) of packing materials per day. Epyllion Ltd.

was established with a view to provide backward linkage support to the country's high quality

export oriented garments industries. Epyllion Ltd. is designed to be the manufacturer

ofCorrugated Carton, Back Board, Neck Board, Poly Bag, Price Ticket, Printed Labels and

Embroidery.The factory is equipped with state of the art machinery and backed by a team of

trained and efficient human resources. Epyllion Ltd. started its journey with a determination to

manufacturer international standard garments to meet up the thirst of world's top brand garments

manufacturers. Company has currently 376 labors in this section. They are categorized as below.

Designation Numbers

Machine Operator 62

Machine Helper 27

Others 87

Total = 376

Objectives of the Study

The objectives of the study can be summarized as follows:

To determine the labor cost To identify the fixed and the variable portion of labor cost To identify the different components of labor cost To identify the various variables that influence in computing labor cost To identify different motivational factors used in controlling labor To identify how the payroll sheet is prepared To identify how the Labor Act, 2006 of Bangladesh is implicated

Methodology

This study is based on both primary and secondary data. Primary data is collected through a

questionnaire survey and direct interview of Executive HR and Executive Accountants of


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Epyllion Ltd. The secondary data was collected from brochures, websites, published articles,

books, etc.

Analysis and Findings

Labor Cost: Wages paid to workers during an accounting period on daily, weekly, monthly or

job basis, plus payroll and related taxes other benefits.Labor cost consists of following matters.

1. Fixed Portion: company pays TK. 3,000 fixed for all labor. This fixed portion includesbasic wage, house rent, and medical allowance.

So the total fixed payment for 376 labors of our visited section of the company is calculated as

below.

Per Head Payment Numbers of Labors = 3,000376 = 1,128,000

2. Variable Portion: Variable cost includes overtime. Company offers maximum two hoursovertime per working day and the payment of overtime is twice of basic wage. So the per

hour overtime payment of a labor is calculated as below.

For example, if a labor works 52 hours (maximum) as overtime then he will get TK. 1,000 which

is calculated as below

=1000

Here,

Basic Wage is TK. 2,000

208 is total numbers of hours worked (826) except 4 holidays in a month

52 is the maximum numbers of overtime hours worked (26 )

So the maximum amount of variable cost of overtime will be (1,000376) = TK. 376,000

Determinants of Wage and Labor Rate: The wage rate or labor rate is determined in many

ways. The different determinants of wage and labor rate are


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1. Per Hour Work2. Per Unit Production

In our visited company, they use per hour work in determining the labor rate. They also follow

the Bangladesh Labor Act, 2006 in determining the minimum labor rate. For example, they pay

Tk. 3,000 as minimum labor wage rate which is fixed from in November of last year.

Types of Motivational Plans: In the age of globalization, competition and information

technology, the organizations are in a serious dilemma; on one hand the management is

considering human capital development and on the other hand they are discussing downsizing

and outsourcing. However, more and more companies are realizing that outsourcing and

downsizing is not the solution. It destroys organizational culture and demotivates the existing

workforce. They are recognizing that the key is to develop motivation plan for the existing

workforce and turn them into valuable asset for the organization.

Company follows some motivational plans which can be classified into two categories: financial

factors and non-financial factors.

Financial Motivational Plans: Monetary incentives are offered in terms of money. Such

incentives provide more cash or purchasing power to labors. Monetary incentives are extremely

attractive to labors (particularly those working at lower levels) as they get the benefit quickly andin concrete terms. Company offers the following monetary incentives to all categories of

workers.

1. Increment: Company provides increments to all of its labors but the rate of increment isnot fixed for all. Increment is provided annually. They considered join date to join date to

determine the completion a year and a labor enjoys increment in every year. To

determine the rate of increment the company considers the efficiency of labor. The

strategies to determine the efficiency of labor are

a. Experienceb. Backgroundc. Production Abilityd. Education


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e. Basic Knowledge2. Bonus: Company provides different types of bonus to its labor. Almost every labor is

allowed to receive bonus. But company follows some guidelines to provide bonus.

Company provides the bonuses to the labor are summarized as below.

a. Festival Bonus: The labors are offered two festival bonuses in every year. The bonusamount is half of each labors basic payment.

b. Attendance Bonus: Each labor is allowed to receive an attendance bonus based onregular attendance. A labor gets Tk. 150 as attendance bonus if his attendance is

100% in a particular month.

c. Insurance: Company has a insurance policy for their workers. The insurance amountis paid when any labor leaves his job. The company contributes 8.33% of basic wage

to group insurance policy. The same amount is also deducted from the labors

monthly wage.

d. Tiffin Allowance: Each labor gets Tk. 10 as Tiffin allowance in every working day.Non-Financial Motivational Plans: Non-monetary incentives are more important than

monetary incentives. Workers prefer monetary incentives as compared to non-monetary

incentives. Company uses the followings non-financial factors for motivation.

1. Training: Company arranges different types of training for their labors. They arrangetraining such as

a. Machine Knowledgeb. Fire Contingencyc. Health & Safetyd. Basic knowledgee. Company also arranges orientation program for newly recruit labor

2. Congenial Working Conditions: Company always tries to maintain a good and friendlyworking environment for their labors.

3. Designation and Status: Company provides proper designation to all of its labors as thelabors feel proud.


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4. Fair Opportunity of Promotion: Company maintains fair opportunity of promotion toall eligible workers. For this company provides training facility to make them eligible for

promotion.

Components of Labor Cost: The minimum wage for an entry level labor is TK. 3,000. This TK.

3,000 consists of the following things-

1. Basic Wage: For an entry level worker basic wage is TK. 2,000 which is calculated as

= 2000

[TK. 200 is deducted as medical allowance]

2. Medical Allowance: Company provides TK. 200 as medical allowance.3. House Rent Allowance: Company provides 40% of basic as house rent allowance. The

amount is calculated as

In brief the minimum wage payment of the company (TK. 3,000) is calculated as below.

ComponentsAmount

(TK)

Basic Wage 2,000

House Rent 800

Medical Allowance 200

Total = 3,000

The other components of labor cost are

1. Overtime: Every worker is allowed to work maximum two hours as overtime in aworking day. The overtime payment is double of basic payment and it is calculated as

hourly basis.


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2. Annual Bonus: Company pays two annual bonuses to its labors. This amount is added toevery labors wage in those months when the festivals occur.

3. Launch Allowance: TK. 10 per working day.

The followings things are deducted from the labors wage.

1. Absenteeism2. Advance wage3. Advance Income Tax4. Group Insurance5. Others

Time Keeping Department: Company has fully computerized system to keep the attendance of

the labors and their working hours. Every worker is provided an electronic punch card. When

they enter into the factory they just punch their card in the punch machine and their attendance

and time of entry and exit is recorded automatically. If any labor unintentionally does not punch

his card during entry of the factory he is considered as absent for that particular day.

Payroll Calculation Sheet: To maintain companys confidentiality they do not provide us their payroll calculation sheet. But they provide the following structure which they follow in

calculation of their net labor payment.


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Epyllion Ltd.

Plot # I/1, Road# 06, Section# 07, Mirpur I/A, Dhaka-1216.

Production: Section: Printing & Packaging

Labor Information Attendance

OTRate

Earnings in Taka

GrossEarningsinTK.

Deduction in

Sl.No.

NameDesignationGrade

JoiningDate

GrossWages

PayableDaysofMonth

DaysWorked

Holidays

DaysAbsent

ApprovedLeave

LateDays

OTHours

BasicWage

HouseRent

MedicalAllowance

LaunchAllowance

AttendanceBonus

OtherAllowance

WagesEarningsinTK

OTAmount

Absenteeism

Advance

HouseRent

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1819 =

(13:18)20 21 22 23 24

_______________ _______________

Accounts Officer Manager


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Payment of Payroll: The amount of payroll of every month is paid within first seven days of

the next month. This amount is paid in cash directly to the labors hand. And every labor is

bound to sign on the stamp when they receive their payment.

Role of Cost Accounting Department: Cost accounting has traditionally considered a

manufacturing support system. Cost accounting is used to help company's management

understand how much it cost to run a business. Understanding the role of cost accounting is

important when one is trying to put together a team of managers to help run the company.

Cost accounting is the area of accounting that record, measures, and report information about

how much things cost within the organization. The role of cost accounting plays in helping

the company to maintain a competitive advantage by creating more value at a lower cost by

efficiently managing a companys value chain of activities, processes and functions. The

information from the cost reports should be interpreted and presented in a way that will be

useful for company's management. The cost object of the company is the cost of anything that

management believes is important.

Role of Financial Accounting Department: Financial accounting helps the company to

report accurate and complete financial statements at the end of each year. It is a

key business process because it provides company partners with insight into a corporation's

competitive standing and economic health. A business partner, such as a lender, may review a

firm's financial data before approving a loan. Financial Accounting involves the accumulation

and reporting of accounting information that is oriented primarily toward external users, such

as lenders and investors.

Limitation

This report is prepared on the basis of information collected from direct investigation. While

preparing this report reducing limitation was emphasized more carefully to make this report

practical one. As the report's requirements are very much confidential we are not able to that

information which can make this report more indisputable. In this report the cost of labor is

calculated only by the minimum wage rate as other rates are not provided by the company.

Again the payroll sheet mentioned in this report is prepared by us but the structure of this

payroll sheet is not fictitious. Due to maintain confidentiality, company just provides us the

structure not the full sheet.


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References

i. http://www.epylliongroup.com/epl.htmlii. http://www.businessdictionary.com/definition/labor-cost.htmliii. http://zamanfam.com/MBA/Motivationplan.htmliv. http://kalyan-city.blogspot.com/2010/06/motivation-motivational-factors.html

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