Labour Cost All

 

Chaper 2.

Labour Cost

2.1 Cost Accounting Standards - Employee Cost

2.2 Meaning of Wages and Salary and Difference.

2.3 Principles of Good wage system.

2.4 Time Keeping and Time Booking: Meaning, traditional and recent methods.

2.5 Concept of Payroll Accounting

 2.6 Idle Time and Overtime

2.7 Methods of remuneration: -

Time rate system

Piece rate system

Differential piece rate system,

Taylor’s Differential piece rate system, Merrick Differential piece rate system.

Bonus scheme- Halsey and Rowan premium scheme.

2.8 Labour Turnover: -Meaning, Causes, Methods and Remedies

 

2.1 Introduction to Cost Accounting Standard, Cost Accounting Standard Board

The Institute of Cost Accountants of India, recognizing the need for structured approach to the measurement of cost in manufacture or service sector and to provide guidance to the user organizations, government bodies, regulators, research agencies and academic institutions to achieve uniformity and consistency in classification, measurement and assignment of cost to product and services, has constituted Cost Accounting Standards Board (CASB) with the objective of formulating the Cost Accounting Standards

Keeping in view latest legal and contemporary developments, the Cost Accounting Standards Board develops Cost Accounting Standards. To explain the requirements of Standards and provide the guidance with practical examples and illustrations on technical issues relating to Cost Accounting Standards issued by the Institute, CASB also issues Guidance Notes. Further, there may also be other technical issues relating to topics of importance for which the Cost Accounting Standards are not necessary but these technical issues need guidance to members and industry with respect to measurement, classification, assignment and presentation of cost in cost statements, the CASB issues Guidance Notes on such topics. The Institute Board has so far issued 24 Cost Accounting Standards, Generally Accepted Cost Accounting Principles, 9 Guidance Notes on Cost Accounting Standards and two Guidance Notes on “Treatment of Costs Relating to Corporate Social Responsibility (CSR) Activities” and “Maintenance of Cost Accounting Records for Construction Industry Including Real Estate and Property Development Activity”.

The structure of Cost Accounting Standard consists of Introduction, Objectives of issuing standards, Scope of standard, Definitions and explanations of the terms used in the standard, Principles of Measurement, Assignment of Cost, Presentation and Disclosure.

 

1.      While formulating the Cost Accounting Standards, the CASB takes into consideration the applicable laws, usage and business environment prevailing in India. CASB also gives due consideration to the Cost Accounting Standards, principles and practices being followed by the other countries in the world. If due to subsequent changes in the law, a particular standard or any part thereof becomes inconsistent with such a law, the provisions of the said law shall prevail/succeed.

Cost Accounting Standard Number	Title of CAS	Effective Date (For the period commencing from)
CAS 1 (Revised 2015)	Classification of Cost	1st April 2015
CAS 2 (Revised 2015)	Capacity Determination	1st April 2016
CAS 3 (Revised 2015)	Production and Operation Overhead	1st April 2016
CAS 4	Cost of Production for Captive Consumption	1st April 2010
CAS 5	Average (Equalized) Cost of Transportation	1st April 2010
CAS 6	Material Cost	1st April 2010
CAS 7	Employee Cost	1st April 2010
CAS 8	Cost of Utilities	1st April 2010
CAS 9	Packing Material Cost	1st April 2010
CAS 10	Direct Expenses	1st April 2010
CAS 11	Administrative Overheads	1st April 2010
CAS 12	Repairs and Maintenance Cost	1st April 2010
CAS 13	Cost of Service Cost Centre	1st April 2011
CAS 14	Pollution Control Cost	1st April 2012
CAS 15	Selling and Distribution Overheads	1st April 2013
CAS 16	Depreciation and Amortisation	1st April 2014
CAS 17	Interest and Financing Charges	1st April 2014
CAS 18	Research and Development Costs	1st April 2014
CAS 19	Joint Costs	1st April 2014
CAS 20	Royalty and Technical Know-How Fee	1st April 2014
CAS 21	Quality Control	1st April 2014
CAS 22	Manufacturing Cost	1st April 2015
CAS 23	Overburden Removal Cost	1st April 2017
CAS 24	Treatment of Revenue in Cost Statements	1st April 2017

 

Cost Accounting Standard 7 – Employee Cost

Cost Accounting Standard (CAS-7) provides guidelines for the measurement, assignment, and disclosure of employee costs in cost accounting records. It ensures uniformity and consistency in the treatment of employee-related expenses across different organizations. Employee cost includes wages, salaries, allowances, incentives, benefits, and other welfare expenses incurred by an employer. The standard classifies employee costs into direct and indirect costs based on their traceability to cost objects. It mandates the inclusion of statutory benefits such as Provident Fund (PF), Employee State Insurance (ESI), and gratuity. Employee costs must be measured at actual cost incurred, excluding abnormal costs like penalties or fines. The allocation of indirect employee costs is done using appropriate cost drivers such as labor hours or machine hours. CAS-7 requires proper disclosure of employee cost components in cost statements for better transparency. It helps organizations in cost control, decision-making, and compliance with labor laws. By standardizing employee cost treatment, CAS-7 enhances financial accuracy and improves cost management practices.

 

A) Objectives and Scope of Cost Accounting Standard (CAS-7): Employee Cost

Objectives

1. To provide a uniform and consistent approach for measuring and assigning employee costs in cost records.
2. To ensure accuracy and transparency in cost determination related to employee expenses.
3. To classify employee costs into direct and indirect costs for proper allocation to cost objects.
4. To facilitate effective cost control and decision-making by providing detailed employee cost data.
5. To ensure compliance with labor laws and statutory requirements such as Provident Fund (PF) and Employee State Insurance (ESI).
6. To enable better budgeting and forecasting of employee-related expenses.
7. To improve cost comparison across different periods and industries.
8. To provide a structured framework for disclosure and reporting of employee costs in cost statements.

Scope

1. CAS-7 applies to all types of organizations where cost accounting records are maintained.
2. It covers all categories of employee costs, including wages, salaries, incentives, allowances, and benefits.
3. It applies to both direct and indirect employee costs, ensuring proper allocation to cost objects.
4. It includes contract labor costs, payments to outsourced employees, and temporary workers.
5. It encompasses statutory obligations like PF, gratuity, bonus, and medical reimbursements.
6. The standard applies to all sectors and industries, ensuring a uniform approach to cost accounting.
7. It requires organizations to exclude abnormal costs, such as penalties or fines, from employee cost calculations.
8. The scope also extends to proper documentation and disclosure of employee costs in cost records and financial reports.

B) Definitions Under Cost Accounting Standard (CAS-7): Employee Cost

Employee Cost –

The total expenditure incurred by an employer on employees, including salaries, wages, incentives, benefits, and statutory payments.

Direct Employee Cost –

Employee cost that can be directly attributed to a specific cost object, such as wages paid to production workers for a particular product.

Indirect Employee Cost –

 Employee cost that cannot be directly assigned to a cost object and is allocated using cost drivers, such as salaries of administrative staff.

Wages and Salaries –

Basic payments made to employees in exchange for their services, including hourly wages, monthly salaries, and piece-rate wages.

 

Allowances –

Additional payments made to employees apart from basic wages, such as Dearness Allowance (DA), House Rent Allowance (HRA), and Travel Allowance.

Overtime Payments –

 Extra wages paid to employees for working beyond regular hours, calculated based on an agreed rate.

Bonus and Incentives –

Performance-based payments given to employees, including production bonuses, profit-sharing incentives, and target-based rewards.

Retirement Benefits –

Payments made to employees after retirement, such as Provident Fund (PF), gratuity, pension, and leave encashment.

Employee Welfare Expenses –

Expenditure on facilities aimed at improving employee well-being, such as health insurance, recreation, and training programs.

Contract Labor Cost –

 Payments made to outsourced or contractual employees hired for specific tasks, including contractor fees and benefits.

 

C) Components of Employee Cost

 

Component	Examples
Basic Salary/Wages	Monthly salary, hourly wages
Allowances	Dearness Allowance (DA), House Rent Allowance (HRA), Transport Allowance
Overtime Payments	Extra pay for additional working hours
Bonus & Incentives	Performance bonus, production-linked incentives
Retirement Benefits	Provident fund, gratuity, pension
Fringe Benefits	Free accommodation, company car, subsidized meals
Employee Welfare Expenses	Medical facilities, recreational expenses
Training & Development	Training programs, skill enhancement costs
Contract Labor Costs	Payments to outsourced workers
Other Statutory Payments	Employee State Insurance (ESI), Labor Welfare Fund

 

D) Presentation and disclosure of CAS -7

Under Cost Accounting Standard (CAS) - 7, the presentation and disclosure requirements for employee cost in cost statements are as follows:

1.     Classification and Aggregation: Employee costs should be classified into direct and indirect categories and aggregated accordingly.

2.     Cost Object Association: Direct employee costs must be directly traced and assigned to specific cost objects, while indirect employee costs should be allocated based on appropriate allocation bases.

3.     Detailed Disclosure: The cost statements should disclose the following:

·         Total employee cost, with a breakdown of major components such as salaries, wages, allowances, bonuses, and benefits.

·         Basis of allocation for indirect employee costs to cost objects.

·         Any employee costs incurred in foreign exchange, along with the exchange rate applied.

·         Details of employee costs related to abnormal situations, if any, and their treatment in the cost statements.

·         Employee costs paid to related parties, if applicable, with appropriate disclosures.

4.     Comparative Information: Presentation of comparative figures for employee costs of previous periods to facilitate analysis and understanding of trends.

5.     Compliance Statement: A declaration confirming adherence to CAS-7 in the measurement and assignment of employee costs.

E) Exclusions from Employee Cost:

1.     Abnormal Costs

Unusual or atypical costs whose occurrence is irregular and unexpected, such as penalties, damages, or other similar costs. These should not be included in employee cost.

2.     Abnormal Idle Time

Costs associated with idle time due to abnormal situations like strikes, lockouts, or accidents are considered abnormal costs and are excluded from employee cost.

3.     Penalties and Damages Paid

Any penalties, damages, or similar costs paid to statutory authorities or other third parties are not considered part of employee cost.

4.     Severance Payments Related to Abnormal Causes

Severance payments arising from abnormal causes, such as plant closure, discontinuance of operations, or restructuring, are excluded from employee cost.

2.2  Meaning of Wages and Salary

Wages and salaries are fundamental forms of employee compensation, each with distinct structures and implications. Wages are payments made based on the amount of work performed or the number of hours worked. This compensation model is common in roles involving manual, unskilled, or semi-skilled labor, where work hours may vary. For example, a factory worker earning Rs.15 per hour would receive Rs.600 for a 40-hour work week. Wage earners are typically eligible for overtime pay, receiving additional compensation for hours worked beyond the standard work week, as mandated by labor laws. Wages are often disbursed on a weekly  basis, aligning with the short-term nature of the work measurement.

In contrast, salaries refer to a fixed amount of compensation paid to employees at regular intervals, such as weekly or monthly, regardless of the number of hours worked. This form of payment is common for executives, managers, professionals, and office employees, whose pay is stated on an annual or monthly basis. Salaried employees receive a predetermined amount each pay period, providing income stability. For instance, an employee with an annual salary of Rs. 60,000 would receive Rs.5,000 per month, irrespective of the actual hours worked during that month. Salaried positions often come with benefits such as health insurance, paid time off, and retirement plans. However, depending on their role and applicable labor laws,

 

Diffrence between Wages and Salaries                   

Points	Wages	Salaries
Definition	Compensation based on the number of hours worked or units produced.	Fixed compensation paid regularly, typically quoted on an annual basis. .
Payment Structure	Variable; depends on hours worked or output.	Fixed; remains consistent regardless of hours worked.
Calculation Basis	Hourly, daily, or per unit.	Annual amount divided into regular payments (e.g., monthly).
Overtime Eligibility	Typically eligible for overtime pay for hours beyond the standard workweek.	Often exempt from overtime pay, depending on role and regulations.
Income Stability	Earnings can fluctuate based on hours worked or output.	Provides consistent income, aiding in financial planning.
Common Recipients	Hourly workers, often in roles involving manual or unskilled labor.	Professionals, managers, and administrative staff.
Payment Frequency	Weekly or bi-weekly.	Monthly or semi-monthly.
Benefits and Bonuses	May have limited additional benefits.	Often includes benefits like health insurance, paid leave, and bonuses.
Job Classification	Often associated with blue-collar jobs.	Commonly linked to white-collar positions.
Impact of Absences	Directly affects earnings; no work means no pay.	Typically unaffected in the short term; paid time off policies apply.

 

2.3 Principles of Good wage system

 

A well-structured wage system is essential for fostering employee motivation, ensuring fairness, and enhancing organizational efficiency. The principles of an effective wage system include:

1. Equity and Fairness: Compensation should reflect the value of the work performed, ensuring that employees perceive their pay as fair relative to their responsibilities and contributions. This principle aligns with the concept of "equal pay for equal work," promoting internal equity within the organization.
2. External Competitiveness: Wage rates should be competitive with those offered by similar organizations in the industry and region. Aligning wages with local prevailing rates helps attract and retain talent, as emphasized by the principle that "wages will be set according to local prevailing rates."
3. Performance-Based Rewards: Incorporating mechanisms to reward excellent performance encourages productivity and aligns individual goals with organizational objectives. Recognizing and compensating high performers fosters a culture of excellence.
4. Transparency and Communication: Clearly communicating the criteria and processes for wage determination ensures employees understand how their compensation is calculated. Transparency fosters trust and reduces potential misunderstandings.
5. Compliance with Legal Standards: Adhering to labor laws and regulations is fundamental. Ensuring that wage practices comply with legal requirements protects the organization from potential disputes and penalties.
6. Regular Review and Adjustment: Periodically assessing and adjusting wage structures in response to market changes, inflation, and organizational performance ensures that the compensation system remains relevant and effective.
7. Guaranteed Wages: Implementing a guaranteed wage on a time basis can serve as a psychological boost to employees, providing income stability and security.

 

2.4 Time keeping and time booking

 

Timekeeping and time booking are fundamental components of effective workforce management, each serving distinct purposes to ensure operational efficiency and accurate cost allocation.

Timekeeping refers to the systematic recording of employees' attendance and the total hours they work. This process is primarily utilized for payroll preparation, compliance with labor laws, and monitoring overall employee attendance. Traditional methods of timekeeping include:

• Manual Attendance Registers: Employees sign in and out on paper-based registers, noting their arrival and departure times.
• Mechanical Time Clocks: Devices where employees insert time cards that are stamped with the exact time of entry and exit.

In contemporary settings, technological advancements have introduced more sophisticated methods:

• Digital Swipe Cards: Employees use magnetic or RFID cards to clock in and out, with data automatically recorded in a central system.
• Biometric Systems: Utilize fingerprint or facial recognition technology to accurately track attendance, reducing the possibility of time fraud.
• Timekeeping Software: Applications that allow employees to log their hours electronically, often integrated with payroll systems for seamless processing.

The primary objectives of timekeeping include ensuring accurate wage calculations, maintaining discipline in attendance, and fulfilling statutory requirements related to labor regulations.

 

Time booking, on the other hand, involves recording the specific tasks or jobs on which employees spend their working hours. This process is crucial for cost analysis, job costing, and assessing productivity levels. Traditional methods of time booking encompass:

• Job Cards: Physical cards where employees document the time spent on each task or job throughout their shift.
• Daily Time Sheets: Forms filled out by employees detailing the allocation of their working hours to various tasks or projects.

Modern approaches to time booking have evolved with technology:

• Digital Time-Tracking Tools: Software solutions that enable employees to log time spent on specific tasks, often accessible via computers or mobile devices.
• Project Management Software: Integrated platforms that combine task assignments with time-tracking features, providing real-time insights into project progress and resource utilization.

The objectives of time booking include accurate allocation of labor costs to specific jobs or departments, facilitating detailed cost analysis, and aiding in the assessment of employee productivity and efficiency.

In short,  timekeeping focuses on tracking the overall attendance and working hours of employees for purposes like payroll and compliance, time booking delves deeper into understanding how those hours are distributed across various tasks and projects. Both processes are integral to effective workforce management, ensuring not only that employees are compensated fairly but also that organizational resources are utilized efficiently.

2.5 Pay Roll Accounting

Payroll accounting is the process of recording, managing, and analyzing all financial transactions related to employee compensation within an organization. This includes tracking hours worked, calculating gross wages, withholding applicable taxes and deductions, and ensuring accurate net pay distribution. Additionally, payroll accounting involves accounting for employer obligations such as matching contributions to Social Security and Medicare, as well as unemployment taxes. Proper payroll accounting ensures compliance with legal requirements, maintains accurate financial records, and supports employee satisfaction by ensuring timely and precise payments. Payroll accounting is the systematic process of recording, managing, and analyzing all financial transactions related to employee compensation within an organization.

Payroll accounting involves several key components essential for accurate financial management and compliance:

1. Employee Information: Maintaining accurate records of each employee's personal and job-related details, such as name, address, Social Security number, job title, and compensation structure, is fundamental. This information ensures precise payroll calculations and adherence to legal requirements.
2. Gross Salary: This is the total remuneration an employee earns before any deductions, including basic pay, allowances, bonuses, and overtime. It represents the complete earnings and serves as the basis for calculating deductions and net pay.
3. Deductions: These are amounts subtracted from the gross salary, encompassing mandatory withholdings like income tax, Social Security, and Medicare, as well as voluntary deductions such as retirement contributions and health insurance premiums. Proper management of deductions ensures compliance and accurate net pay.
4. Net Salary: Also known as take-home pay, this is the amount an employee receives after all deductions have been applied to the gross salary. It reflects the actual earnings available to the employee for personal use.
5. Employer Payroll Taxes and Contributions: Employers are responsible for additional expenses beyond gross salaries, including matching contributions to Social Security and Medicare taxes, federal and state unemployment taxes, and payments toward employee benefits. These obligations are crucial for legal compliance and employee welfare.
6. Payroll Liabilities: These are obligations the employer owes but has not yet paid, such as accrued wages, with held taxes, and other deductions. Accurate tracking of payroll liabilities is essential for financial reporting and ensuring timely payments.

 

7. Payroll Expenses: This component includes all costs incurred by the employer related to employee compensation, such as salaries, wages, employer-paid taxes, and benefits. Proper accounting of payroll expenses is vital for financial analysis and budgeting.

2.6 Idle Time and Overtime

Idle Time

Idle time refers to periods when employees or machinery are available and ready to work but remain unproductive due to various factors.

Types of Idle Time:

1. Normal Idle Time: This encompasses unavoidable and anticipated periods such as machine maintenance, setup times, or scheduled employee breaks. These intervals are inherent to regular operations and are typically factored into production planning.
2. Abnormal Idle Time: This includes unexpected and often avoidable periods of inactivity resulting from unforeseen events like equipment breakdowns, material shortages, or inefficient scheduling. Such idle time can lead to increased operational costs and reduced productivity.

Causes of Idle Time

• Administrative Causes: Inefficient management decisions, such as overstaffing or inadequate workflow planning, can lead to employees or machines being unproductive.
• Production-Related Causes: Delays in the production process, such as waiting for materials or machine maintenance, can result in idle periods.
• Economic Causes: Fluctuations in market demand or economic downturns can reduce production needs, leading to idle resources.

Implications of Idle Time

Idle time represents a cost to businesses, as wages are paid, or machinery depreciates without corresponding productivity. This inefficiency can negatively impact profit margins and overall operational effectiveness.

Strategies to Reduce Idle Time

1. Efficient Scheduling: Aligning work schedules with production demands to minimize periods of inactivity.
2. Preventive Maintenance: Regular upkeep of machinery to prevent unexpected breakdowns that cause idle time.
3. Cross-Training Employees: Enabling staff to perform multiple roles ensures that they can be redeployed to other tasks during potential idle periods.

 

Overtime

Overtime refers to the hours worked by an employee that exceed the standard or scheduled working hours established by their employer or governing labor laws. This concept ensures that employees are compensated for the additional time they dedicate beyond their regular work schedule.

 Aspects of Overtime:

1. Standard Workweek Threshold: In many jurisdictions, including the United States, the Fair Labor Standards Act (FLSA) mandates that non-exempt employees receive overtime pay for hours worked over 40 in a workweek.
2. Overtime Pay Rate: The FLSA specifies that overtime pay must be at least one and one-half times the employee's regular pay rate for each hour worked beyond the standard 40-hour workweek.
3. Daily Overtime Considerations: While federal law focuses on weekly hours, some states have additional regulations requiring overtime pay for hours worked beyond a certain number each day.
4. Exempt vs. Non-Exempt Employees: Not all employees are eligible for overtime pay. Exempt employees, often salaried and occupying executive, administrative, or professional roles, are typically excluded from overtime provisions.
5. Overtime in Sports: Beyond the workplace, "overtime" also refers to an additional period of play in sports to break a tie, ensuring a decisive outcome.

2.7 Methods of remuneration

Time Rate System

The Time Rate System is a wage payment method where employees are compensated based on the amount of time they work, irrespective of the quantity of output produced. This system emphasizes the duration of work over productivity metrics.

Definition:

In the Time Rate System, workers receive wages proportional to the time they spend on the job, such as hourly, daily, weekly, or monthly rates, without direct consideration of the volume of work completed.

Advantages:

1. Simplicity: The system is straightforward to administer, making payroll calculations uncomplicated.
2. Income Stability: Employees receive a predictable and stable income, aiding in personal financial planning.
3. Quality Emphasis: Since pay isn't tied to output quantity, workers can focus on producing high-quality work without the pressure to increase quantity.
4. Equality: All workers are treated equally in terms of wage payment, reducing potential grievances and fostering a harmonious work environment.
5. Administrative Ease: Requires less administrative oversight, as the system fosters mutual understanding and trust between employer and employee.

Formula: The wage calculation in the Time Rate System is:

Wages = Total Hours Worked × Wage Rate per Hour

Example: If an employee works 160 hours in a month at a rate of ₹50 per hour, their wages would be: Wages = 160 hours × ₹50/hour = ₹8,000

This method ensures that employees are compensated for their time, promoting fairness and simplicity in wage calculations.

Piece Rate system

The Piece Rate System is a wage payment method where employees are paid based on the number of units they produce rather than a fixed hourly wage or monthly salary. This system is commonly used in industries where output is measurable, such as manufacturing, textiles, and agriculture.

Advantages

Encourages Productivity - Workers are motivated to produce more as their earnings depend on output.
            Easy to Calculate Wages - The wage calculation is straightforward and based on the number of units produced.
            No Need for Constant Supervision - Employees work at their own pace without direct supervision.
            Lower Labor Costs for Employers -Wages are directly tied to productivity, reducing idle time costs.

            Rewards Efficiency - Hardworking and skilled workers earn more than those who work slowly.

The Piece Rate System is a method of wage payment where workers are paid based on the number of units they produce or tasks they complete, rather than a fixed hourly or monthly wage. The formula for calculating earnings under the piece rate system is:

Formula: Earnings=Number of Units Produced×Rate per Unit

Feature	Piece Rate System	Time Rate System
Definition	Wages are paid based on the number of units produced.	Wages are paid based on the time spent working, regardless of output.
Focus	Productivity and efficiency	Time spent on the job
Suitability	Best for jobs where output is measurable (e.g., manufacturing, agriculture).	Best for jobs requiring accuracy, quality, or supervision (e.g., office work, teaching).
Supervision Need	Less supervision required as wages depend on output.	More supervision needed to ensure productivity.
Worker Motivation	High motivation as more production leads to higher wages.	Low motivation since earnings are fixed regardless of effort.
Earnings Stability	Earnings may vary based on output and external factors.	Stable income as wages are fixed per hour or month.
Quality of Work	Quality may decrease as workers focus on quantity.	Quality is maintained as workers are not pressured to produce more.

Differential Piece Rate System

The Differential Piece Rate System is a wage payment method where workers are paid different rates per unit based on their efficiency or output level. This system was introduced by Frederick Winslow Taylor as part of his Scientific Management Principles to encourage higher productivity and efficiency in industries.

 

Features of the Differential Piece Rate System

·         Multiple wage rates – Workers are paid different rates per unit based on their productivity.

·          Performance-based incentives – Efficient workers earn more, while inefficient workers earn less.

·          Encourages productivity – Workers strive to increase output to earn higher wages.
Cost-effective for employers – Reduces unnecessary labor costs by rewarding only productive workers.

·         Scientific approach – Uses time and motion studies to determine an optimal standard output.

 

Types of Differential Piece Rate

 

A)    Taylor's Differential Piece Rate System

 

This system, developed by F.W. Taylor, establishes two wage rates based on a standard output level

1. Higher Rate – Paid to workers who meet or exceed the standard output.
2. Lower Rate – Paid to workers who produce less than the standard output.

Example

If the standard output is 100 units per day, the rates are:

• ₹12 per unit for workers producing 100 units or more.
• ₹8 per unit for workers producing less than 100 units.

 

B. Merrick’s Differential Piece Rate System

Merrick’s system uses three wage rates instead of two:

Worker Efficiency (%)	Rate per Unit
Less than 80% of Standard Output	Low Rate (Minimum Wage)
80% to 100% of Standard Output	Normal Rate
More than 100% of Standard Output	Higher Rate (Bonus Rate)

 

Advantages of the Differential Piece Rate System

 Encourages higher productivity – Workers strive to produce more to earn higher wages.
Reduces idle time – Workers put in more effort to meet or exceed standards.
Promotes efficiency – Inefficient workers are either motivated to improve or are phased out.
Better labor cost control – Employers only pay for actual performance.

 

 

 

Disadvantages of the Differential Piece Rate System

 Demotivates slow workers – Workers earning the lower rate may feel discouraged.
 Difficult to implement – Requires accurate studies to determine fair standard output levels.
 Quality issues – Workers may rush production to earn more, leading to defective units.
 Stressful for employees – Constant pressure to meet or exceed targets.

 

 

Bonus scheme- Halsey and Rowan premium scheme

Halsey Premium Bonus Scheme

The Halsey Premium Bonus Scheme is a time-based incentive plan that rewards workers for completing tasks in less than the standard time. Workers receive a fixed wage for the actual time worked and an additional bonus for time saved. The bonus is usually 50% of the time saved, though it can vary based on company policy. This scheme ensures workers get a minimum guaranteed wage even if they do not save time. It encourages efficiency, as workers can increase their earnings by completing tasks faster. Employers benefit by reducing labor costs while maintaining productivity. However, workers do not receive the full benefit of time saved, as they share it with the employer.

The scheme is simple to understand and implement, making it popular in industrial and production sectors. A potential drawback is that workers may rush tasks, possibly affecting work quality.

The Halsey Premium Bonus Scheme encourages workers to improve efficiency by offering a bonus for time saved. It ensures a minimum guaranteed wage, providing financial security to workers even if they do not complete tasks early. The scheme is simple to understand and implement, making it easy for employers to manage. Since the employer retains a portion of the time saved, it leads to cost savings while increasing productivity. Workers are motivated to complete tasks efficiently, leading to better time management in production processes. Unlike piece-rate systems, this scheme maintains a balance between speed and quality by ensuring workers do not rush excessively. It is suitable for semi-skilled and skilled workers, making it a flexible incentive model. Employers can control labor costs as bonuses are shared with workers rather than giving them the full benefit of time saved. The system reduces idle time and increases workplace efficiency. Lastly, it creates a win-win situation for both workers and employers by promoting productivity while maintaining fair compensation.

 

 

 

The formula for total earnings is:

 (Time Taken × Hourly Rate) + (50% × Time Saved × Hourly Rate)

Advantages of the Halsey Premium Plan

1. Encourages Productivity: Workers are motivated to complete tasks efficiently as they receive a bonus based on time saved.
2. Guaranteed Minimum Wage: Even if workers don’t save time, they still receive their base pay, ensuring income stability.
3. Simple Calculation: Compared to other incentive plans, the Halsey plan’s formula is straightforward, making it easier for management to implement.
4. Balanced Worker Incentives: Since only a portion (usually 50%) of the time saved is given as a bonus, it prevents workers from rushing too much and compromising quality.
5. Cost Control for Employers: Employers benefit from reduced labor costs as they share the time savings with employees rather than giving them full savings.

Disadvantages of the Halsey Premium Plan

1. Limited Worker Incentives: Since workers receive only a portion (e.g., 50%) of the time saved, they may feel less motivated compared to other plans that offer higher bonuses.
2. Quality Concerns: While the bonus system encourages efficiency, some workers might still rush their work, leading to a decline in quality.
3. Possible Worker Dissatisfaction: Employees may prefer incentive plans where they receive a higher share of the time saved, like the Rowan Plan, which offers proportionally increasing bonuses.
4. Not Ideal for All Industries: The plan works best for tasks with measurable time standards but may not be suitable for jobs requiring high precision or creative tasks.

 

Rowan Premium Plan : Introduced by James Rowan, is an incentive wage system designed to boost worker productivity by offering bonuses based on time saved during task completion. It ensures workers receive a guaranteed minimum wage while also providing additional earnings when tasks are completed in less time than the standard allotted time.

Features of the Rowan Premium Plan

1. Guaranteed Minimum Wage: Workers are assured a base wage calculated by multiplying the actual time taken by the standard hourly rate.
2. Bonus Calculation: A bonus is awarded based on the proportion of time saved relative to the standard time.

The formula for total earnings is:

Total Earnings = (Time Taken × Hourly Rate) + [(Time Saved / Standard Time) × (Time Taken × Hourly Rate)]

Where:

Time Taken is the actual hours worked.

Standard Time is the predetermined time expected to complete the task.

Time Saved is the difference between Standard Time and Time Taken.

Advantages of the Rowan Premium Plan:

1. Encourages Efficiency: Workers are motivated to complete tasks more quickly to earn bonuses.
2. Balanced Incentives: The bonus proportionately reflects the time saved, preventing excessive speeding that might compromise quality.
3. Fair Compensation: Ensures workers receive a guaranteed minimum wage, providing income stability.

Disadvantages:

1. Complex Calculations: Determining bonuses requires detailed time tracking and calculations.
2. Moderate Incentives for High Efficiency: Workers saving significant time might feel the bonus doesn't fully reflect their efficiency compared to other plans like the Halsey Plan.

The Rowan Premium Plan is often compared to the Halsey Plan. While both offer bonuses for time saved, the Halsey Plan provides a fixed percentage (typically 50%) of the time saved as a bonus, whereas the Rowan Plan's bonus is based on the ratio of time saved to standard time, potentially offering more balanced incentives.

 

 

Problems : Labour Cost

Problem No. 1 – Oct-2010 Calculate the earnings of a worker from the following information under:

a) Halsey Plan,            b) Rowan Plan

Standard Time            : 100 Hours

Time Taken                 : 80 Hours

Rate of wages             : Rs. 2 per hour

Solution:-

S – T 2

a) Halsey Plan

                        E= T x R +              x R

100 Hrs – 80 Hrs 2

 

                        = 80 Hrs x `2 +                                  x ` 2

20 Hrs 2

 

                        = `160 +                  x 2

 

                        = `160 + ` 20

 

                        = `180

b) Rowan Plan

S – T 2

 

                        E= T x R +              x  T x R

100 Hrs – 80 Hrs 100 Hrs

 

                        = 80 Hrs x `2 +                                    x 80 Hrs x ` 2

20 Hrs 100 Hrs

 

                        = `160 +                  x `160

 

                        = `160 + ` 32

                        = `192

Problem No. 2 –  April-2011

Calculate the earnings of a worker from the following information under:a) Halsey Plan, & b) Rowan Plan : The Standard time for a job is 20 hours @ Rs.3 per hour. The job was actually finished within 15 hours.

Solution: -

S – T 2

a) Halsey Plan

                        E= T x R +              x R

20 Hrs – 15 Hrs 2

 

                        = 15 Hrs x `3 +                                   x ` 3

5 Hrs 2

 

                        = `45  +                   x `3

 

                        = `45 + ` 7.50

                        = `52.50

b) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

20 Hrs – 15 Hrs 20 Hrs

 

                        = 15 Hrs x `3 +                                    x 15 Hrs x ` 3

5 Hrs 20 Hrs Hrs

 

                        = `45  +                   x `45

 

                        = `160 + ` 11.25

                        = `56.25

 

 

Problem No. 3 –

3) Oct-2011

Calculate the total earnings & effective wage rate from the following information on:

(a) Halsey Plan & (b) Rowan Plan

Standard Time                        - 50 hours

Actual Time Taken                 - 40 hours

Rate of Wages                         - Rs.1 Per hour

Dearness Allowance               - 50 paise per hour worked

Solution: -

S – T 2

1) a) Halsey Plan

                        E= T x R +              x R   + D.A.

50 Hrs – 40 Hrs 2

 

                        = 40 Hrs x `1 +                                   x `1  + ` 20

10 Hrs 2

 

                        = ` 40  +                  x `1  + ` 20

 

                        = ` 40 + ` 5 + ` 20

 

                        = ` 65

b) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R   + D.A.

50 Hrs – 40 Hrs 50 Hrs

 

                        = 40 Hrs x `1 +                                    x 40 Hrs x ` 1   + ` 20

10 Hrs 50 Hrs Hrs

 

                        = `40 +                    x `40  + ` 20

 

                        = `40 + ` 8 + ` 20

                        = `68

2) Effective wage Rate of earning

Total earning Time Taken

           

            =

` 65 40 Hrs

 

a) Halsey Plan =                 = ` 1.625 per Hour

` 68 40 Hrs

 

b) Rowan Plan =

 

Calculation of D.A.                For       1 Hour = ` 0.50

                                                            40 Hours = ?

40 Hrs x `0.50 1 Hr 40 Hrs

 

                                               

 

                                                            = ` 20

 

 

Problem No. 4 –April-2012

Standard time allotted for a job is 20 hours & the rate per hour is Rs. 2 plus a dearness allowance @ 50 paise per hour worked. The actual time taken by a worker is 15 hours. Calculate the earnings under,

i) Time rate system

ii) Halsey Premium Plan

iii) Rowan Premium Plan

Solution: -

i) Time Rate System -

            E = ( Time taken x Rate per Hour ) + D.A.

 

              = (15 Hrs x ` 2) + ` 7.50

 

              = ` 30 + ` 7.50

 

F            = ` 37.50

S – T 2

ii) Halsey Plan

                        E= T x R +              x R   + D.A.

20 Hrs –15 Hrs 2

 

                        = 15 Hrs x `2 +                                   x `2  + ` 7.50

5 Hrs 2

 

                        = ` 30  +                  x `2  + ` 7.50

 

                        = ` 30 + ` 5 + ` 7.50

 

                        = ` 42.50

 

iii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R   + D.A.

20 Hrs – 15 Hrs 20 Hrs

 

                        = 15 Hrs x ` 2 +                                   x 15 Hrs x ` 2   + ` 7.50

5 Hrs 20 Hrs Hrs

 

                        = `30 +                    x `30  + ` 7.50

 

                        = `40 + ` 7.50 + ` 7.50

 

                        = `45

 

 

Problem No. 5 –Oct-2012

From the following, calculate the earnings of a worker under: a) Halsey Plan b) Rowan Plan

Time Allowed             : 48 Hours

Time Taken                 : 40 Hours

Rate per hour              : Rs. 10 

Solution:-

S – T 2

i) Halsey Plan

                        E= T x R +              x R

48 Hrs – 40 Hrs 2

 

                        = 40Hrs x`10 +                                   x ` 10

8 Hrs 2

 

                        = `400  +                 x `10

 

                        = `400 + ` 40

                        = `440

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

48 Hrs – 40 Hrs 48 Hrs

 

                        = 40 Hrsx `10+                                  x 40 Hrs x ` 10

8 Hrs 48 Hrs Hrs

 

                        = `400 +                  x `400

 

                        = `400 + ` 66.67

                        = `466.67

Problem No. 6 –April- 2013

Standard time allotted for a job is 40 hours & the rate per hour is Rs. 2 plus a dearness allowance @ 50 paise per hour worked. The actual time taken by a worker is 30 hours. Calculate the earnings under- a) Halsey Plan & b) Rowan Plan.

Solution: -

S – T 2

i) Halsey Plan

                        E= T x R +              x R   + D.A.

40 Hrs –30 Hrs 2

 

                        = 30 Hrs x `2 +                                   x `2  + ` 15

10 Hrs 2

 

                        = ` 60  +                  x `2  + ` 15

 

                        = ` 60 + ` 10 + ` 15

                        = ` 85

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R   + D.A.

40 Hrs – 30 Hrs 40 Hrs

 

                        = 30 Hrs x ` 2 +                                   x 30 Hrs x ` 2   + ` 15

10 Hrs 40 Hrs Hrs

 

                        = `60 +                    x `60  + ` 15

 

                        = `40 + ` 15 + ` 15

                        = `90

 

Calculation of D.A.    For       1 Hr = `0.50                            30 Hrs x ` 0.50

                                                30 Hrs = ?                                          1

= `15

Problem No. 7 –April-2015

Calculate the total earnings of the worker under Halsey & Rowan Plans.

Standard Time            : 10 hours

Hourly Rate                : Rs.2

Time taken                  : 6 hours

Solution: -

S – T 2

i) Halsey Plan

                        E= T x R +              x R

10 Hrs – 6 Hrs 2

 

                        = 6 Hrs x `2  +                                    x ` 2

4 Hrs 2

 

                        = ` 12  +                  x `2

 

                        = `12 + ` 4

 

                        = `16

 

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

10 Hrs – 6 Hrs 10 Hrs

 

                        = 6 Hrs x ` 2 +                                   x 6 Hrs x ` 2

4 Hrs 10 Hrs Hrs

 

                        = ` 12 +                   x  `12

 

                        = `12 + ` 4.80

 

                        = `16.80

Problem No. 8 –

8) April-2015 (2013 Pattern)

From the following information of a manufacturing company working for 8 hours, calculate each of these two employees the total earnings under:

a) Straight Piece Rate Method

b) Halsey Premium Plan

Hourly Rate of wages             : Rs.4

Standard Time for 10 units     : 1 Hour

Actual output for a day of 8 hours:

Skilled Employees                  : 80 units

Unskilled Employees              : 120 units

Solution: -

a) Straight Piece Rate

            E = No. of units produced x Rate per unit

            Skilled Employees      = 80 units x ` 0.40

                                                = ` 32

 

            Unskilled Employees = 120 units x ` 0.40

                                                = ` 48

b) Halsey premium plan

S – T 2

 

                        E= T x R +              x R

 

Problem No. 9 –Oct-2015 (2013 Pattern)

Star Engineers Ltd. has fixed the standard time to produce one unit of product ‘X’ at 20 hours. Standard wages Rate is fixed to Rs. 25 per hour. A worker produces 20 units of product ‘X’ in 260 hours. Calculate his wages under,

a) Halsey Premium Plan

b) Rowan Premium Plan.

Also calculate works cost under both the plans if direct material cost of one unit of product ‘X’ is Rs. 240 & Factory overheads are 250% of  prime cost.

Solution: -

S – T 2

i) Halsey Plan

                        E= T x R +              x R

400 Hrs–260 Hrs 2

 

                        = 260 Hrs x ` 25 +                                     x ` 25

140 Hrs 2

 

                        = ` 6,500  +                    x `25

 

                        = ` 6,500 + ` 1,750

 

                        = `8,250

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

400 Hrs – 260 Hrs 400 Hrs

 

                        = 260Hrs x `2 +                                 x 260 Hrs x ` 25

140Hrs 400 Hrs Hrs

 

                        = `6,500 +                    x  `25

 

                        = `6,500 + ` 2,275

 

                        = `8,775

In the books of Star Engineers Ltd.

Statement of works Cost

 

Particulars		H.P.P (`)	R.P.P. (`)
	Direct material cost	240	240
Add	Direct wages
	`8,250 20 Units HPP =	412.50	-
	`8,775 20 Units RPP =	-	438.75
	Prime Cost	652.50	678.75
Add	Factory Overheads
	HPP = ` 652.50 x 250 %)	1,631.25	-
	RPP = ` 978.75 x 250 %)	-	1,696.88
	Work Cost	2,283.75	2,375.63
	For 1 unit = 20 Hrs        20 Units = ?        = 400 Hrs

Problem No. 10 – April-2016 (2013 Pattern)

Time Allotted to complete the job is 60 hours. Mr. Z completes the same in 44 hours. He produces 1,000 units during the period. The rate per unit is Rs. 2.50 & the rate per hour is Rs 1.50. You are required to compute the total earnings of Mr. Z under:

i) Time Rate Method  ii) Piece Rate Method iii) Halsey Plan           iv) Rowan Plan

Solution: -

i) Time Rate method-

                        E = Hours worked x Rate per Hr.

                           =  44 Hrs x `1.50

                           = ` 66

ii) Piece Rate Method

                        E = No. of units produced x Rate per unit

                            = 1000 units x ` 2.50

                            = ` 2,500

iii)

S – T 2

 Halsey Plan

                        E= T x R +              x R

60 Hrs – 44 Hrs 2

 

                        = 44 Hrs x `1.50 +                                   x `1.50

16 Hrs 2

 

                        = ` 66  +                  x `1.50

 

                        = ` 66 + ` 12    = `78

iv) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

60 Hrs – 44 Hrs 60 Hrs

 

                        = 44Hrs x`1.50+                                x 44 Hrs x ` 1.50

16Hrs 60 Hrs Hrs

 

                        = `66  +                  x  `66

 

                        = `66 + ` 17.60  = ` 83.60

Problem No. 11 –April-2016 (2013 Pattern) External

Time allotted to complete a job is 50 hours. Job is completed in 48 hours. The rate per hour is Rs. 10. Compute the earnings under Halsey Premium Plan of 50% sharing & Rowan Premium Plan.

Solution: -

a)

S – T 2

 Halsey Plan

                        E= T x R +              x R

50 Hrs – 48 Hrs 2

 

                        = 48 Hrs  x  `10 +                                     x ` 10

2 Hrs 2

 

                        = `480 +                  x `10

 

                        = ` 480 + ` 10  = `490

b) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R

50 Hrs – 48 Hrs 50 Hrs

 

                        = 48 Hrs x `10+                                 x 48 Hrs x ` 10

2Hrs 50 Hrs Hrs

 

                        = `480+                  x  `480

 

                        = `480 + ` 19.20 = ` 499.20

Problem No. 12 –April-2016 (2008 Pattern) 

Calculate the total earnings of a worker, under Halsey Premium Plan & Rowan Premium Plan separately with the help of the following information:

Time Allowed             : 90 Hours                   Time Taken                 : 72 Hours

Rate of wages             : Rs. 25 per hour         Dearness Allowance   : Rs. 1,25 per hour

Solution: -

S – T 2

i) Halsey Plan

                        E= T x R +              x R   + D.A.

90 Hrs –72 Hrs 2

 

                        = 72Hrs x `25+                                  x `25  + ` 90

18 Hrs 2

 

                        = `1,800+               x`25  + ` 90

 

                        = ` 1,800 + ` 225 + ` 90

                        = ` 2,115

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R   + D.A.

90 Hrs – 72 Hrs 90 Hrs

 

                        = 75 Hrs x `25+                                   x 72 Hrs x `25   + ` 90

18 Hrs 90 Hrs Hrs

 

                        = `1,800 +                   x `1,800  + ` 90

 

                        = `1,800 + ` 360 + ` 90

                        = `2,250

Calculation of D.A.

                                    For       1 Hr = `1.25

                                                72 Hrs = ?       = `90

Problem No. 13 –

13) Oct-2016 (2013 Pattern) – External Calculate the total earnings of a worker under Halsey Premium Plan & Rowan Premium Plan separately, with the help of the following data: A worker finished his job within 72 hours as against 90 hours allowed. Hourly wage rate is 25 paise. Under Halsey Plan, he is to be paid 50% of the time saved.

Solution: -

a)

S – T 2

 Halsey Premium Plan

                        E= T x R +              x R

90 Hrs – 72 Hrs 2

 

                        = 72 Hrs  x `0.25 +                                  x ` 0.25

18 Hrs 2

 

                        = `18  +                   x `0.25

 

                        = ` 18 + ` 2.25 = `20.25

b) Rowan Premium Plan

S – T 2

 

                        E= T x R +              x T x R

90 Hrs – 72 Hrs 90 Hrs

 

                        = 72Hrs x`0.25+                                x 72 Hrs x ` 0.25

18 Hrs 90 Hrs Hrs

 

                        = `18 +                   x  `18

 

                        = `18 + ` 3.60

                        = ` 21.60

Problem No. 14 –Oct-2016 (2013 Pattern) 

Weekly working Hours           : 48

Hourly Wage Rate                  : Rs. 10

Standard Time per unit          : 20 minutes

Standard Output per week     : 120 units

Actual Output for the week   : 150 units.

You are required to compute the weekly earnings of a worker under:

i) Taylor’s Differential Piece Rate.

ii) Halsey Premium Plan.

 

Solution: -

1) Taylors Differential Piece Rate-

            80 % of piece Rate when output is below standard 120% of piece Rate when output

is at or above standard.

 

            Calculation of weekly wages

=

                                    If         1 Hour = `10               48 Hrs.  x 10

                                                48 Hours = ?                     1 Hr

 

                                                                              = `480

            Calculate of piece Rate per unit.

=

                                    If         120 units = `480          1 unit x `480

                                                1 unit = ?                        120 units

 

                                                                                            = `4 Per unit

           

Low piece Rate           = `4 x 80%      = `3.20

High Piece Rate          = `4 x 120%    = `4.80

 

E = No. of units produced  x rate per unit

               = 150 units x `4.80

               = ` 720

 

3)

S – T 2

 Halsey Premium Plan

                        E= T x R +              x R

50 Hrs – 48 Hrs 2

 

                        = 48 Hrs  x ` 10  +                                   x ` 10

2 Hrs 2

 

                        = `480  +                 x `10

 

                        = ` 480 + ` 10

 

                        = `490

Calculation of standard Time

=

                        If         1 unit = 20 minutes                 150 units x 20 minutes

                                    150 units = ?                                       1 units

                                                                              = 3000 Minutes

=

            In Hours          3000 Minutes

                                      60 Minutes

                              = 50 Hrs.

 

 

Problem No. 15 –April-2017 (2013 Pattern) External

Calculate the total Earnings of the Workers A & B under Halsey Premium Plan & Rowan Premium Plan from the following Particulars:

Standard time allowed to produce-one article: 10 hours

            Hourly Rate of Wages   : Rs.1

Actual Time Take to produe-5 articles

A- 45 hours

B- 30 hours

Solution: -

                        Calculation of standard Time

                                    For       1 Article  = 10 Hrs

                                                5 Article = ?                            = 50 Hrs

i) Halsey Premium Plan-

S – T 2

 

                        E= T x R +              x R

50 Hrs – 45 Hrs 2

 

            A’sE    = 45 Hrs  x ` 1  +                                      x  ` 1

 

5 Hrs 2

 

                        = ` 45  +                   x  ` 1

 

                        = ` 45 + ` 2.50

 

                        = `47.50

50 Hrs – 30 Hrs 2

 

            B’sE    = 30 Hrs  x ` 1  +                                      x  ` 1

5 Hrs 2

 

                        = ` 30 +                    x  ` 1

 

                        = ` 30 + ` 10

 

                        = `40

b) Rowan Premium Plan

S – T 2

 

                        E= T x R +              x T x R

50 Hrs – 45 Hrs 50 Hrs

 

            A’sE    =  45 Hrs x ` 1+                                  x 45 Hrs  x ` 1

5 Hrs 50 Hrs Hrs

 

                        = `45 +                   x  `45

 

                        = ` 45 + ` 4.50

                        = ` 49.50

50 Hrs – 30 Hrs 50 Hrs

            B’sE    =  30 Hrs x ` 1+                                  x 30 Hrs  x ` 1

20 Hrs 50 Hrs Hrs

 

                        = ` 30 +                  x  `30

 

                        = ` 30 + ` 12

                        = ` 42

 

 

Problem No. 16 –

16) Oct-2017 (2013 Pattern) External

Following are the details of worker ‘A’ & ‘B’.

Worker            Time Allowed             Time Taken

A                     26 hrs                          20 hrs

B                     30 hrs                          20 hrs

The normal & basic wage rate is Rs. 8 per day of 8 hour.

Calculate the amount payable to each worker under:

i) Time Rate Method

ii) Halsey Premium Plan

iii) Rowan Premium Plan

Solution: -

i) Time Rate method

                        E = Time taken  x  Rate per Hour

Worker A’sE   =  20 Hrs x ` 1

                        =  ` 20

 

Worker B’sE   = 20 Hrs. x ` 1

                        = ` 20

ii) Halsey Premium Plan –

S – T 2

 

                        E= T x R +              x R

26 Hrs – 20 Hrs 2

 

Worker A’sE   = 20 Hrs  x ` 1  +                                      x  ` 1

6 Hrs 2

 

                        = ` 20  +                   x  ` 1

 

                        = ` 20 + ` 3

                        = `23

 

30Hrs – 20 Hrs 2

Worker B’sE   = 20 Hrs  x ` 1  +                                      x  ` 1

10 Hrs 2

 

                        = ` 20 +                    x  ` 1

                        = ` 20 + ` 5

                        = `25

iii) Rowan Premium Plan

S – T 2

 

                        E= T x R +              x T x R

26 Hrs – 20 Hrs 26 Hrs

 

Worker A’sE   =  20 Hrs x ` 1+                                  x 20 Hrs  x ` 1

6 Hrs 26 Hrs Hrs

 

                        = `20 +                   x  `20

 

                        = ` 20 + ` 4.62

                        = ` 24.62

30 Hrs – 20 Hrs 30 Hrs

Worker B’sE   =  20 Hrs x ` 1+                                  x 20 Hrs  x ` 1

10 Hrs 30 Hrs Hrs

 

                        = ` 30 +                  x  `20

 

                        = ` 20 + ` 6.67

                        = ` 26.67

 

Problem No. 17 –

17) April-2017 (2013 Pattern), Oct-2006

Calculate the total earnings & the effective rate of earnings of Mr. Ganesh under Halsey Premium Plan 50% of time Saved & Rowan Premium Plan separately with the help of following information:

Time Allowed             : 90 hours

Time Taken                 : 72 hours

Rate of wages             : 25 per hour

Dearness Allowance   : Rs.1.25 per hour

Solution: -

S – T 2

i) Halsey Plan

                        E= T x R +              x R   + D.A.

90 Hrs –72 Hrs 2

 

                        = 72Hrs x `25+                                  x `25  + ` 90

18 Hrs 2

 

                        = `1,800+               x`25  + ` 90

 

                        = ` 1,800 + ` 225 + ` 90

 

                        = ` 2,115

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R   + D.A.

90 Hrs – 72 Hrs 90 Hrs

 

                        = 75 Hrs x `25+                                   x 72 Hrs x `25   + ` 90

18 Hrs 90 Hrs Hrs

 

                        = `1,800 +                   x `1,800  + ` 90

 

                        = `1,800 + ` 360 + ` 90

 

                        = ` 2,250

 

=

iii) Effective Rate of earnings             Total earning

                                                                Time Taken

= `29.375 per Hrs

=

a) Halsey Premium Plan         `2,115

                                                72 Hrs

 

= `31.25 per Hrs

=

b) Rowan Premium Plan         `2,250

                                                72 Hrs

 

 

Problem No. 18 –Oct-2017 (2013 Pattern)

Calculate the total earnings of Mr. A & Mr. B under Halsey Premium Plan & Rowan Premium Plan from the following information:

Standard Time allotted to produce a single job is 10 hours & the rate per hour is Rs. 1.

Mr. A produces 5 jobs in 45 hours.

Mr. B produces 5 jobs in 30 hours.

Solution: -

i) Halsey Premium Plan –

S – T 2

 

                        E= T x R +              x R

50 Hrs – 45 Hrs 2

 

Mr. A’sE         = 45 Hrs  x ` 1  +                                      x  ` 1

5 Hrs 2

 

                        = ` 45  +                   x  ` 1

 

                        = ` 45 + ` 2.50

 

                        = `47.50

 

50Hrs – 30 Hrs 2

Mr. B’sE         = 30 Hrs  x ` 1  +                                      x  ` 1

20 Hrs 2

 

                        = ` 30 +                    x  ` 1

 

                        = ` 30 + ` 10

 

                        = `40

ii) Rowan Premium Plan

S – T 2

 

                        E= T x R +              x T x R

50 Hrs – 45 Hrs 50 Hrs

 

Mr. A’sE         =  45 Hrs x ` 1+                                  x 45 Hrs  x ` 1

5 Hrs 50 Hrs Hrs

 

                        = ` 45 +                  x  `45

 

                        = ` 45 + ` 4.50

                        = ` 49.50

50 Hrs – 30 Hrs 50 Hrs

Mr. B’sE         =  30 Hrs x ` 1+                                  x 30 Hrs  x ` 1

20 Hrs 50 Hrs Hrs

 

                        = ` 30 +                  x  `30

 

                        = ` 30 + ` 12

                        = ` 42

 

 

Problem No. 19 –March- 2018 (2013 Pattern) External

            A worker produced 200 units in a week’s time. The guaranteed weekly wages payment for 45 hours is Rs. 81. The expected time to produce one unit is 15 minutes which is raised further by 20% under the incentive scheme. What will be the earning per hour of that worker under Halsey & Rowan Bonus Scheme?

Solution: -

1) Calculate of standard Time

            For       1 unit  = 15 minutes                200 units x 15 minutes

                        200 units = ?                                         1 unit

                        = 3000 minutes                      

            For       60 min   = 1 Hr                        3000 Minutes x 1 Hr               =          50 Hrs

                        3000 min = ?                                   60 minutes

                                                                        Add 20 % Increase                  =          10 Hrs

                                                                             (50 Hrs x 20 %)                 

                                                                                                                        =          60 Hrs

2) Rate per Hour

            For       45 Hours = `81            ` 81 x 1            =          `1.80 per Hr.

                        1 Hour  = ?                                45 Hrs.

 

 

S – T 2

i) Halsey Plan

                        E= T x R +              x R  

60 Hrs –45 Hrs 2

 

                        = 45Hrs `1.80+                                  x `1.80 

15 Hrs 2

 

                        = ` 81 +                  x`1.80

 

                        = ` 81 + ` 13.5

 

                        = ` 94.50

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R 

60 Hrs – 45 Hrs 60 Hrs

 

                        = 45 Hrs x `1.80+                                   x 45 Hrs x `1.80

15 Hrs 60 Hrs Hrs

 

                        = ` 80  +                   x `81 

 

                        = `81 + ` 20.25

 

                        = `101.25

 

 

Problem No. 20 March- 2018 (2013 Pattern), Oct-2001, April-2007

During one week the workman X manufactured 200 articles. He receives wage for a guaranteed 44 hours week at the rate of Rs.15 per hour. The estimated time to produce one article is 15 minutes & under incentive scheme, the time allowed is increased by 20%. Calculate his gross wages under Rowan Premium Bonus & Halsey Premium Bonus incentive plan.

Solution: -

a) Calculation of standard time

                        For       1 article = 15 Min.                  200 article x 15Min.

                                    200 article = ?                                 1 article

                                                                                    = 3000 Minutes.

 

b)                     For       60 Min = 1 Hr                         3000 Mins x 1

                                    3000 Mins. = ?                            60 Mins.

                                                                                    = 50 Hrs.

 

                                    Add 20 % Increase                  = 10 Hrs.

                                                                                    = 60 Hrs.

 

S – T 2

i) Halsey Plan

                        E= T x R +              x R  

60 Hrs –44 Hrs 2

 

                        = 44Hrs x` 15+                                  x ` 15 

16 Hrs 2

 

                        = ` 600 +                x` 15

 

                        = ` 660 + ` 120

 

                        = ` 780

ii) Rowan Plan

S – T 2

 

                        E= T x R +              x T x R 

60 Hrs – 44 Hrs 60 Hrs

 

                        = 44 Hrs x ` 15 +                                    x 44 Hrs x ` 15

16 Hrs 60 Hrs Hrs

 

                        = ` 600+                   x ` 660 

 

                        = ` 660 + ` 176

 

                        = ` 836

 

 

Problem No. 21 –

21) Oct- 2018 (2013 Pattern) 

With the help of the following information, you are required to ascertain the wages paid to workers P & Q under Taylor’s Differential Piece Rate System:

Standard Time wages               : 40 units per hour

Simple Time Wages                 : Rs. 4 per hour

Differential Rates to be applied:

75% of piece rate when below standard.

125% of piece rate when above standard.

The workers have produced in a day of 8 hours as follows:

P- 240 units & Q- 400 units

Solution: -

1) Calculation of Normal Piece Rate per unit.

                        For       40 units = `4                            1 unit x ` 4

                                    1 unit = ?                                   40 units

                                                                                    = ` 0.10 per unit

2) Tylor’s differential piece Rate per unit

            Low piece Rate – below standard

                        75% of normal piece Rate i. e. ` 0.10

                        = ` 0.10 x 75 %          

                        = ` 0.075

            High piece Rate at / or standard

                        125 % of normal piece Rate i.e. `0.10

                        = ` 0.10 x 125%

                        = ` 0.125

3) P’s E = 240 units x ` 0.075

               = ` 0.18

    Q’s E = 400 units x `0.125

               = ` 50

 

Problem No. 22 –Oct- 2018 (2013 Pattern) External

Standard time allotted for a job is 20 hours & the rate per hour is Re. 1 plus a dearness allowance @ 30 paise per hour worked. The actual time taken by a worker is 15 hours. Calculate the earnings under:

i) Time wage system

ii) Piece wage system

iii) Halsey plan &

iv) Rowan scheme

1) Time wage system

                        E = (Time taken x Rate per Hr ) + D.A.         Calculation of B.A.

                           = ( 15 Hrs x ` 1) + ` 4.50                              1 Hr = `0.30

                           = `15 + ` 4.50                                               15 Hrs = ?

                           = ` 19.50                                                       = `4.50

 

2) Halsey Plan

S – T 2

 

                        E= T x R +              x R   + D.A.

20 Hrs –15 Hrs 2

 

                        = 15Hrs x` 1+                        x ` 1         + ` 4.50

5 Hrs 2

 

                        = ` 15 +                    + ` 4.50

 

                        = ( `15 + ` 2.50) + ` 4.50

                        = ` 17.50 + ` 4.50

 

                        = ` 22

ii) Rowan Plan

S – T S

 

                        E= T x R +              x T x R   + D.A.

20 Hrs – 15 Hrs 20 Hrs

 

                        = 15 Hrs x ` 1 +                                      x 15 Hrs x ` 1     + ` 4.50

5 Hrs 20 Hrs Hrs

 

                        = ` 15 +                    x ` 15      + ` 4.50 

 

` 75 20 Hrs Hrs

 

                        = ` 15 +                     + ` 4.50 

 

                        = ` 15 + ` 3.75 + ` 4.50

 

                        = ` 23.25

 

 

Problem No. 23 –April-2019 (2013 Pattern)

            A worker under the Halsey method of remuneration has a day rate of Rs. 12 per week of 48 hours plus cost of living bonus of 10 paise per hour worked. He is given an 8 hours task to perform, which he accomplishes in 6 hours. He is allowed 30 % of the time saved as premium bonus. What would be his total hourly rate of earnings & what difference would it make if he were paid under the Rowan Method.

Solution:-

1) Halsey Plan

30 100

 

                        E= T x R +            ( S – T) x R + Cost of Living Bonus

30 100

 

                        = 6 Hrs x` 0.25 +                (8 Hrs – 6 Hrs) x ` 0.25 + ` 0.60

30 100

 

                        = ` 1.50 +           x (2 Hrs) x ` 0.25  + ` 0.60

 

                        = ` 1.50 ( ` 0.60 x ` 0.25) + ` 0.60

                        = ` 1.50 + ` 0.15 + ` 0.60

                        = ` 2.25

 

Total earnings Time Taken

Rate of eraning per Hr.

                                                =

` 2.25 6 Hrs

 

                                                =

 

                                                =  0.375

ii) Rowan Plan

S – T S

 

                        E= T x R +              x T x R   + Cost Living Bonus

 

8 Hrs – 6 Hrs 8 Hrs

 

                        = 6 Hrs x ` 0.25 +                                   x 6 Hrs x ` 0.25    + ` 0.25

2 Hrs 8 Hrs Hrs

 

                        = `1.50 +                  x ` 1.5    + ` 0.25 

 

                        = ` 1.50 + ` 0.375 + ` 0.25

 

                        = ` 2.125

Rate of earning  per Hr.

Total earning Time Taken

                       

                        =

` 2.125 6 Hrs

 

                        =

 

                        = ` 0.354

 

Difference would made if worker were paid under Rowan plan.

                        = Halsey plan – Rowan plan

                        = ` 2.25 – ` 2.125

                        = ` 0.125

 

 

Problem No. 24- April-2019 (2013 Pattern)-External

Calculate the total earnings of a worker, under Halsey Premium Plan & Rowan Premium Plan with the help of the following information:

A worker finished his job within 72 hours as against 90 hours allowed. Hourly rate of wages is Rs.0.25. Under Halsey Plan, he is to be paid 50% of the time saved.

Solution: -

i) Halsey Premium Plan

S – T 2

 

                        E= T x R +              x R  

90 Hrs –72 Hrs 2

 

                        = 72Hrs x` 0.25+                               x ` 0.25 

18 Hrs 2

 

                        = ` 18 +                  x` 0.25

 

                        = ` 18 + ` 2.25

 

                        = ` 20.25

ii) Rowan Premium Plan

S – T 2

 

                        E= T x R +              x T x R 

90 Hrs – 72 Hrs 90 Hrs

 

                        = 72 Hrs x ` 0.25 +                                 x 72 Hrs x ` 0.25

18 Hrs 90 Hrs Hrs

 

                        = ` 18 +                    x ` 18 

 

                        = ` 18 + ` 3.60

 

                        = ` 21.60

 

 

 

Problem No. 25 –

25) April- 2006

On the basis of the following information, calculate the earnings of Sara & Diksha on the straight piece rate basis & Taylor’s differential piece rate system:

Standard Production               : 8 units per hour

Normal Time Rate                  :  Rs. 40 per hour

Differential to be applied: 80% of piece rate below standard, 120 % of piece rate at or above standard.

            In a 9 hour day, Sara produces 54 units & Diksha  produces 75 units.

Solution: -

a) Straight Piece Rate Basis-

 

            E = No. of units produced x Rate per unit

            Sara’s Earnings           = 54 units x ` 0.50

                                                = ` 27

 

            Diksha’s Earnings       = 75 units x ` 0.50

                                                = ` 37.50

 

            Rate per unit

                                                            8 units = ` 4         `4 x 1 unit

                                                            1 unit = ?                 8 units          = ` 0.50

 

b) Taylors Diiferential Piece Rate system-

            Standard Production = 8 units x 9 Hrs.

                                                 = 72 Units

            Sara’s Production        = 54 units i.e. below standard

            So rate applicable is 80% of piece rate

                                          i. e. = ` 0.50 x 80%

                                                 = ` 0.40

 

            Diksha’s Production    = 75 units i.e. above standard

            So rate applicable is 120% of piece rate at or above standard

                                          i. e. = ` 0.50 x 120%

                                                 = ` 0.60

 

            Sara’s Earnings            = 54 units x ` 0.40

                                                 = ` 21.60

           

            Diksha’s Earnings        = 72 units x ` 0.60

                                                 = `45

 

CHAPTER: -

Labour Turnover

Introduction

Labour turnover refers to the rate at which employees leave a company and are replaced by new employees within a specific period. It is an important indicator of workforce stability and organizational efficiency. Labour turnover can be voluntary, when employees resign or retire, or involuntary, when they are dismissed or laid off. It is usually expressed as a percentage and calculated by dividing the number of employees leaving by the average number of employees. High labour turnover can result in increased recruitment and training costs for businesses. Common causes include low wages, lack of job satisfaction, poor working conditions, and limited career growth opportunities. A moderate turnover rate is beneficial as it brings fresh talent and ideas into the organization. However, excessive turnover may reduce productivity, lower employee morale, and disrupt operations. Companies implement retention strategies such as better compensation, employee engagement, and career development programs to manage turnover. Understanding and controlling labour turnover is crucial for long-term business success and workforce stability.

Labour turnover is the rate at which employees leave an organization and are replaced by new employees over a given period. It reflects workforce stability and is commonly expressed as a percentage.

Definitions

1. "Labour turnover is the rate of change in the working staff of a concern during a specified period."
2. Dale Yoder – "Labour turnover is the time-to-time changes in the composition of the workforce that result from hiring, termination, promotion, and transfer."
3. Michael Armstrong – "Labour turnover is the proportion of employees leaving an organization over a set period, requiring replacement."

Causes of Labour Turnover

Labour turnover refers to the rate at which employees leave and are replaced in an organization over a given period. It can be caused by several factors, broadly classified into voluntary, involuntary, and external causes.

1. Voluntary Causes (Employee-Initiated)

• Better Job Opportunities – Employees leave for higher salaries, better benefits, or career growth in another organization.
• Job Dissatisfaction – Issues like a toxic work environment, lack of recognition, or poor management can drive employees to quit.
• Low Compensation – Inadequate salaries and lack of incentives can lead to dissatisfaction and resignation.
• Work-Life Balance Issues – Excessive work pressure, long hours, or lack of flexible work arrangements may cause employees to leave.
• Lack of Career Growth – Absence of promotions, skill development opportunities, or career progression discourages employees from staying.
• Poor Working Conditions – Unsafe work environments, lack of resources, or inadequate facilities push employees to resign.

2. Involuntary Causes (Employer-Initiated)

• Retrenchment/Layoffs – Economic downturns, financial losses, or automation may force organizations to reduce staff.
• Dismissal Due to Poor Performance – Employees failing to meet work standards or violating company policies may be terminated.
• End of Contract or Temporary Work – Workers hired for seasonal, project-based, or contractual jobs may leave when their tenure ends.
• Health Issues or Disability – Some employees may be unable to continue due to medical conditions or workplace accidents.

3. External Causes

• Economic Conditions – Economic booms or recessions influence job stability and employment opportunities.
• Industrial Competition – Higher demand for skilled workers in a specific industry can lead to poaching by competitors.
• Government Policies & Legal Factors – Changes in labor laws, retirement policies, or new employment regulations can impact job security.
• Technological Changes – Automation and digital transformation may render certain jobs obsolete, leading to layoffs.
• Migration & Relocation – Employees moving to different cities or countries for better opportunities or personal reasons

Methods of Measuring Labour Turnover

Labour turnover can be measured using different methods to analyze the rate at which employees leave an organization. The most common methods are:

1. Separation Method

This method calculates the percentage of employees who leave the organization within a given period.

Formula:

Labour Turnover Rate –

No. of workers left in April 2020 Average No. of workers in April 2020

1) Separation Method: -

            Labour Turnover Rate =                                                                      x 100

                                               

No. of workers replaced in April 2020 Average No. of workers in April 2020

2) Replacement Method: -

            Labour Turnover Rate =                                                                      x 100

                                                =               

No. of workers left  Average No. of workers in April 2020

No. of workers replaced Average No. of workers in April 2020

+

3) Flux Method: -

Average No. of workers

            Labour Turnover Rate =                                                                            x 100

Problem-1 March-2018, March-2018 (External) 

During April, 2020 the following information is obtained from the Personnel Department of a Manufacturing Concern:

Labour force at beginning of the month 950 & 1050 at the end of the month. During the month, 10 persons quit while 30 persons are discharged. 140 workers were engaged, out of which only 20 persons were appointed in the vacancy created by the number of workers separated and the rest on account of an expansion scheme.

Calculate the Labour Turnover Rate under different methods.

Solution : -

Number of workers on 1-4-2020 + Number of workers on 30-4-2020 2

Calculation of average number of workers in April, 2020

 

950 + 1,050 2

=

 

2,000 2

=

 

=

= 1,000 Workers

Labour Turnover Rate –

No. of workers left in April 2020 Average No. of workers in April 2020

1) Separation Method: -

 

10+30 1,000

            Labour Turnover Rate =                                                                      x 100

 

40 1,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  4 %

No. of workers replaced in April 2020 Average No. of workers in April 2020

2) Replacement Method: -

 

20 1,000

            Labour Turnover Rate =                                                                      x 100

 

                                                =                 x 100

                                                =  2 %

No. of workers replaced in April 2020 Average No. of workers in April 2020

+

No. of workers left  in April 2020 Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in April 2020

40+20 1,000

            Labour Turnover Rate =                                                                            x 100

 

                                                =                 x 100

                                                =  6 %

 

Problem-2 (Oct- 2015) 

On 1^st December, 2020, 900 workers were on the payroll. During the month 10 workers left, 40 workers were discharged & 150 workers were recruited. Of these, 25 workers were recruited in the vacancies of those leaving, while the rest were engaged for an expansion scheme. There were 1,100 workers on payroll as on 31^stDecember, 2020.

            Calculate the Labour Turnover Rate by applying,

a) Separation Method

b) Replacement Method.

c) Flux Method.

Solution: -

No. of workers on 1-12-2020 + No. of workers on 31-12-2020 2

Calculation of average number of workers in Dec., 2020

 

900 + 1,100 2

=

 

2,000 2

=

 

=

= 1,000 Workers

Labour Turnover Rate –

No. of workers left in Dec. 2020 Average No. of workers in Dec. 2020

1) Separation Method: -

 

10+40 1,000

            Labour Turnover Rate =                                                                      x 100

 

50 1,000

                                                    =                 x 100

 

                                                =                 x 100

                                                =  5 %

No. of workers replaced in Dec. 2020 Average No. of workers in Dec. 2020

2) Replacement Method: -

 

25 1,000

            Labour Turnover Rate =                                                                      x 100

 

                                                =                 x 100

                                                =  2.5 %

No. of workers replaced in Dec. 2020 Average No. of workers in April 2020

+

No. of workers left  in Dec. 2020 Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in Dec. 2020

50+25 1,000

            Labour Turnover Rate =                                                                            x 100

 

75 1,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  7.5 %

 

Problem- 3

Following are the details of the workers in the factory for the month of April 2020 given by the personnel department:

Number of workers on 1-4-2019                                            2,500

Number of workers on 31-3-2020                                          1,500

Number of workers discharged                                                   80

Number of workers left the job                                                   40

Number of workers newly appointed against the vacancies        60

Calculate the Labour Turnover Rate & equivalent rate under all 3 methods.

Solution: -

No. of workers on 1-4-2019 + No. of workers on 31-3-2020 2

Calculation of average number of workers in March, 2020

 

2,500 + 1,500 2

=

 

4,000 2

=

 

=

= 2,000 Workers

Labour Turnover Rate –

No. of workers left in March 2020 Average No. of workers in March 2020

1) Separation Method: -

 

80+40 2,000

            Labour Turnover Rate =                                                                      x 100

 

120 2,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  6 %

No. of workers replaced in March 2020 Average No. of workers in March 2020

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

60 2,000

                                                =                 x 100

                                                =  3 %

+

No. of workers replaced in March 2020 Average No. of workers in April 2020

No. of workers left in March 2020 Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in March 2020

120+60 2,000

            Labour Turnover Rate =                                                                            x 100

 

180 2,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  9 %

 

 

 

Problem-4 

From the following information, Calculate labour turnover rate.

Number of workers as on 1-1-2020                  7,600

Number of workers on 31-12-2020                   8,400

During the year, 80 workers left while 320 workers were discharged, 1,500 workers were recruited during the year of whom 300 workers were recruited because of exits & the rest were recruited in accordance with expansion plans.

Solution: -

No. of workers 31-12-2020 Average No. of workers in April 2020

+

No. of workers on 1-1-2020 Average No. of workers in April 2020

Calculation of average number of workers in 2020

 

 

7,600+8,400 2

2

                                                =

 

16,000 2

                                                =

 

                                                =

                                                =  8,000 Workers

Labour Turnover Rate –

No. of workers left in year Average No. of workers in year

1) Separation Method: -

 

80+320 8,000

            Labour Turnover Rate =                                                                      x 100

 

400 8,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  5 %

No. of workers replaced in year Average No. of workers in year

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

300 8,000

                                                =                 x 100

                                                =  3.75 %

No. of workers replaced in year Average No. of workers in April 2020

+

No. of workers left in year Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in year

400+300 8,000

            Labour Turnover Rate =                                                                            x 100

 

700 8,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  8.75 %

 

 

Problem-5 

Y Ltd. provides the following information:

No. of employees on 1-1-2020                   5,000

No. of employees on 31-12-2020               6,000

No. of employees  resigned                           500

No. of employees discharged                        130

 No. of employees replaced                           450

Calculate labour turnover rate.

Solution: -

+

No. of employees 31-12-2020 Average No. of workers in April 2020

No. of employees on 1-1-2020 Average No. of workers in April 2020

Calculation of average number of employees in 2020

 

5,000+6,000 2

2

                                                =

 

11,000 2

                                                =

 

                                                =

                                                =  5,500 Employees

Labour Turnover Rate –

No. of employees left in a year Average No. of employees in a year

1) Separation Method: -

 

500+130 5,500

            Labour Turnover Rate =                                                                      x 100

 

630 5,500

                                                =                 x 100

 

                                                =                 x 100

                                                =  11.45 %

No. of employees replaced in a year Average No. of employees in a year

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

450 5,500

                                                =                 x 100

                                                =  8.18 %

No. of employees replaced in year Average No. of workers in April 2020

+

No. of employees left in year Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of employees in year

630+450 5,500

            Labour Turnover Rate =                                                                            x 100

 

1,080 5,500

                                                =                 x 100

 

                                                =                 x 100

                                                =  19.63 %

 

Problem-6 

The extracts from the payroll in a company is as follows:

 No. of employees at the beginning of 2019                                       150

No. of employees at the end of 2019                                                  200

No. of employees resigned                                                                   20

No. of employees discharged                                                                 5

No. of employees replaced due to resignation & discharges               20

            Calculate the Labour Turnover Rate by applying a) Separation Method b) Replacement Method c) Flux Method.

Solution: -

+

No. of employees at the end Average No. of workers in April 2020

No. of employees at the beginning Average No. of workers in April 2020

Calculation of average number of employees in 2019

 

 

150 + 200 2

2

                                                =

 

350 2

                                                =

 

                                                =

                                                =  175 Employees

Labour Turnover Rate –

No. of employees left in a year Average No. of employees in a year

1) Separation Method: -

 

20 + 5 175

            Labour Turnover Rate =                                                                      x 100

 

25 175

                                                =                 x 100

 

                                                =                 x 100

                                                =  14.29 %

No. of employees replaced in a year Average No. of employees in a year

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

20 175

                                                =                 x 100

                                                =  11.43 %

No. of employees replaced in a year Average No. of workers in April 2020

+

No. of employees left in a year Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of employees in a year

25 + 20 175

            Labour Turnover Rate =                                                                            x 100

 

45 175

                                                =                 x 100

 

                                                =                 x 100

                                                =  25.71 %

 

Problem-7  

            From the following data provided to you, find out the Labour Turnover Rate by applying:

a) Flux Method

b) Replacement Method

c) Separation Method

No. of workers on payroll-

At the beginning of the month                        1,000

b) At the end of the month                              1,200

During the month, 10 workers left, 40 persons were discharged & 150 workers were recruited of these, 20 workers were recruited in the vacancies of those leaving, while the rest were engaged for an expansion scheme.

Solution: -

No. of workers at the end Average No. of workers in April 2020

+

No. of workers at the beginning Average No. of workers in April 2020

Calculation of average number of workers in the period

 

 

1,000+1,200 2

2

                                                =

 

2,200 2

                                                =

 

                                                =

                                                =  1,100 Workers

Labour Turnover Rate –

No. of workers replaced in period Average No. of workers in April 2020

+

No. of workers left in the period Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in the period

50 + 20 1,100

            Labour Turnover Rate =                                                                            x 100

 

70 1,100

                                                =                 x 100

 

                                                =                 x 100

                                                =  6.36 %

No. of workers replaced in the period Average No. of workers in the period

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

20 1,100

                                                =                 x 100

                                                =  1.82 %

No. of workers left in the period Average No. of workers in the period

3) Separation Method: -

 

10 + 40 1,100

            Labour Turnover Rate =                                                                      x 100

 

50 1,100

                                                =                 x 100

 

                                                =                 x 100

                                                =  4.55 %

 

Problem-8   From the following data given by personnel department of Dark Company Ltd. Kanpur, calculate the monthly labour turnover rate & annual labour turnover rate by applying different methods.

No. of workers on payroll-

a) At the beginning of the month                    3412

b) At the end of the month                              4588

During the month 40 workers left, 160 workers were discharged & 600 workers were newly recruited of these 100 workers were recruited in the vacancies of those leaving, while the rest were for an expansion plan.

Solution: -

No. of workers at the end Average No. of workers in April 2020

+

No. of workers at the beginning Average No. of workers in April 2020

Calculation of average number of workers in the month.

 

 

8,000 2

2

                                                            =

 

                                                =

                                                =  4,000 Workers

Labour Turnover Rate –

No. of workers left in the month Average No. of workers in the month

1) Separation Method: -

 

40+160 4,000

            Labour Turnover Rate =                                                                      x 100

 

200 4,000

                                                =                 x 100

 

                                                =                 x 100

                                                =  5 %

5 30

Annual Labour Turnover Rate-

 

                                                =               x 365

 

                                                = 60.83%

No. of workers replaced in the month Average No. of workers in the month

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

100 4,000

                                                =                 x 100

                                                =  2.5 %

2.5 30

Annual Labour Turnover Rate-

 

                                                =               x 365 = 30.42%

No. of workers replaced in month Average No. of workers in April 2020

+

No. of workers left in the month Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in the month

200+100 4,000

            Labour Turnover Rate =                                                                            x 100

 

300 4,000

                                                =                 x 100

 

                                                =                 x 100 =  7.5 %

7.5 30

Annual Labour Turnover Rate-

 

                                                =               x 365

 

                                                = 91.25%

 

Problem-9   The following information relates to work force in a factory during the year 2019-2020.       No. of workers on 1^stApril, 2019                                       2,350

No. of workers on 31^stMarch, 2020                                        2,850

No. of workers who quit on their own                                       200

No. of workers who availed golden handshake opportunity     100

 No. of workers employed during 2019-2020 including       

those employed due to expansion                                              800

Calculate annual labour turnover rate & equivalent monthly turnover rate under different methods.

Solution: -

No. of workers on 31-3-2020 Average No. of workers in April 2020

+

No. of workers on 1-4-2019 Average No. of workers in April 2020

Calculation of average number of workers in 2019-2020

 

2,350+2,850 2

2

                                                            =

 

5,200 2

           

                                                                                                                                                =

                                                =

                                                =  2,600 Workers

Labour Turnover Rate –

No. of workers left in the period Average No. of workers in the period

1) Separation Method: -

 

200+100 2,600

            Labour Turnover Rate =                                                                      x 100

 

300 2,600

                                                =                 x 100

 

                                                =                 x 100

                                                =  11.54 %

11.54 12 months

 Monthly Labour Turnover Rate-

 

                                                =

 

                                                = 0.96%

No. of workers replaced in the period Average No. of workers in the period

2) Replacement Method: -

 

            Labour Turnover Rate =                                                                      x 100

 

200 2,600

                                                =                 x 100

                                                =  7.69 %

7.69 12 months

 Monthly Labour Turnover Rate-

 

                                                =                      = 0.64 %

No. of workers replaced in period Average No. of workers in April 2020

+

No. of workers left in the period Average No. of workers in April 2020

3) Flux Method: -

 

Average No. of workers in the period

300+200 2,600

            Labour Turnover Rate =                                                                            x 100

 

500 2,600

                                                =                 x 100

 

                                                =                 x 100        =  19.23 %

19.23 12 months

Monthly Labour Turnover Rate-

 

                                                =                      = 1.60%

 

Note :- It is assumed that, in calculation of replacement method, all workers who had quit

on their own, are replaced.

Exercise: -

1)         Calculate the total earnings of the worker under Halsey & Rowan Plans. The

            relevant data is as follows:

Time Rate (per hour)              Rs.6

Time allowed                          8 hours

Time Taken                             6 hours

Time saved                             2 hours

2)         Two workers, A & B, produce the same product using the same material. A is paid bonus according to Halsey plan, while B is paid bonus according to Rowan plan. The time allowed to manufacture the product is 100 hours. A has taken 60 hours & B has taken 80 hours to complete the product. The normal hourly rate of wages of workers A & B is Rs. 24 per hour. Calculate the earnings of A & B.

3)         A worker takes 18 hours to complete the job on daily wages & 12 hours on a scheme of payment by results. His hourly rate is Rs. 0.50. The material cost of the product is Rs.8 & factory overheads are recovered at 150% of the total direct wages. Calculate the factory cost of the product under following methods:

a) Time rate system

b) Halsey Plan

c) Rowan Plan

4)         Using Taylor’s differential piece rate system, find the earning of X from the following particulars:

Standard time per piece                      12 minutes

Normal rate per hour                           Rs.10

A produced (in 8 hour day)                37 units

5)         Calculate the earnings of workers P & Q under straight piece rate system & Taylor’s differential piece rate system from the following particulars:

Normal rate per hour                           Rs.1.80

Standard time per unit                        20 seconds

Output per day of 8 hours is as follows:

Worker P                                             1,300 units

Worker Q                                            1,500 units

Differentials to be applied are :

80% of the piece rate                          Below the standard

120% of piece rate                              At or above standard