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Unit 4 - Labour Cost

The document outlines various methods of wage payment, including time wage, piece rate systems, and incentive plans aimed at increasing worker productivity. It details specific systems such as Taylor's differential piece rate, Merrick's system, Gantt's task and bonus plan, Halsey plan, Rowan plan, and Emerson efficiency plan, providing formulas and examples for calculating earnings under each method. Additionally, it includes calculations for workers' earnings based on their output and the respective wage systems applied.

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12 views4 pages

Unit 4 - Labour Cost

The document outlines various methods of wage payment, including time wage, piece rate systems, and incentive plans aimed at increasing worker productivity. It details specific systems such as Taylor's differential piece rate, Merrick's system, Gantt's task and bonus plan, Halsey plan, Rowan plan, and Emerson efficiency plan, providing formulas and examples for calculating earnings under each method. Additionally, it includes calculations for workers' earnings based on their output and the respective wage systems applied.

Uploaded by

xyz065993
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Unit 4: Labour cost

Methods of wage payment


1. Time wage (Time as a basis for pay)
Wages are paid to the employee on the basis of time. Calculated on the basis of number of hours
spent by the worker on a job
Earnings = time tableXtime rate per hour
2. Piece rate system
Wages are paid on the basis of the output produced by the worker irrespective of the time taken
by him
Earnings= number of units produced X rate per unit
If output is not given
Earnings = standard Time allowedX rate per hour
1. Calculate earnings of worker under piece rate system
Please rate being Rs 2 per unit
Ganga 22 units
Radha 20 units
Sita 15 units
2. If rate per unit is rupees 17 and during a day a worker complete 10 units what is the
wages
3.Incentive plans
Any plan which induces a worker to produce more and earn more is called incentive plan
Remuneration paid for increased output is called incentive wages
Objective is to induce a worker to produce more to earn a higher wage and to reduce unit cost

The following are incentive plans


1.Differential piece rate
1. Taylor system
2. Merricks system
3. Gantts’ task and bonus plan
2. Premium bonus plan
1. Halsey plan
2. Rowan plant
3. Emerson efficiency plan
3. Group bonus plan
4. Incentive plan for indirect workers.

1. Taylor’s differential piece rate system:


Introduced by FW Taylor
Low piece rate applicable to worker whose output is below the standard
High piece rate applicable to worker whose output is at or above the standard
1. From the following particulars calculate the earnings of a worker under Taylor's
differential piece rate system
Standard time per hour 20 minutes
Normal rate per hour 90 paise
In a 9 hours day, A produces 25 units
B produces 35 units
Differential rates to be applied:
80% of piece rate below standard
120% of piece rate at or about standard

2. Calculate the earnings under Taylor's differential piece rate from the given information
Rate per hour Rs 6
Standard time per unit 30 minutes
Differential piece rate to be applied:
75% of piece rate below standard
125% of piece rate at or about standard
In 8 hours of a day the actual output of the workers are A 15 units, B 25 units.

2. Merricks differential piece rate system or multiple piece rate system:


3 rates
The lowest rate is for the beginners
The middle rate is for developing workers
Highest rate is for highly efficient workers
Level of efficiency Rate
Below 83% piece rate
Up to 83% to 100% efficiency 110% of piece rate
About 100% efficiency 120% of piece rate

Formula for calculating efficiency:


Efficiency= actual output / standard outputX 100
1. From the following particulars, calculate the total earnings of three workers who are paid
the wages under the merricks differential piece rate system
Normal piece rate Rs 5 per unit
Standard output 40 units per week
Output for a week A 32 units B 37 units C 42 units
Also find out their wages if they are paid on Straight Piece rate wages.

2. Calculate the earnings of workers A, B and C under straight piece system and merricks
multiple piece rate system from the following particulars
Normal rate per hour Rs 10.80
Standard time for unit 1 minute
Output per day is as follows:
A 390 units, B 450 units, C 600 units
working hours per day are 8

3. Gantts’ task and bonus plan


Combination of guarantee time rate and differential piece rate principle
Level of efficiency Rate of bonus
Output below standard no bonus (only time wage )
Standard output time wage + bonus 20% of time rate
Output about standard high piece rate on the basis of output

1. Calculate the earnings of X,Y and Z when their output in a day of 8 hours are X 75 units,
Y 80 units and Z 85 units
Guaranteed time rate is Rs 2 per hour and standard output is 10 units per hour. High piece rate is
fixed at 0.35 paise per unit.
2. The following particulars are given
Time rate Rs 10 per hour
High task 80 units per week
Piece rate above high task Rs 15 per unit
In a 40 hours week, the production of the workers was A 70 units B 80t units C 85 units
D 110 units
Calculate the wages of the workers under gantt's task and bonus plan.

Halsey plan
Workers will be paid a guaranteed hourly rate plus a percentage of wages for the time saved.
Earnings =time taken X time rate + bonus
Where bonus = ½ ( time saved X time rate)

1. The standard time for producing 100 articles is 50 hours. The rate of wages is Rs 1.5 0
per hour. The actual time taken for producing 100 articles is 42 hours. What are the
earnings of workers under the Halsey plan?
2. Standard time allowed for a job is 50 hours. The hourly rate of wages is Rs 2 per hour
plus a dearness at Rs 2.50 per hour worked. The actual time taken by the worker was 40
hours. calculate total wages on halsey plan.
Rowan plan
Earnings= time taken X time taken + bonus
Bonus = time saved / standard TimeX time takenX time rate per hour
Earnings = time taken X time rate + time saved/standard TimeX time taken X time rate.
1. From the following information, calculate bonus, total earnings and rate of earnings per
hour under the Rowan plan. Time allowed 6 hours, hourly rate Rs1.50, time taken 4
hours.
2. Shri Ganesh finished work in 120 hours as against 140 hours allowed. His hourly rate is
Rs 5. He gets a DA of Rs 16 per day of 8 hours worked in addition to his wages. calculate
his total earnings under the Rowan plan.
3.
Emerson efficiency plan:
Level of efficiency rate of bonus
Below 66.66% time wage
66.66% to 100% time wage +bonus 20% of time wage
Abov 100% time wage + 20% of bonus of time wage + 1% of bonus for every
1% increase in efficiency

1. Calculate earnings of a worker under Emerson efficiency plan.


Standard output in 8 hours= 60 units and rate per hour Rs 2. The actual output is as follows: A=
72 units, B= 36 units, C=60 units
2. From the following information calculate Wage payment as per Emerson efficiency plan
and wage cost per unit
Standard time 16 hours
Standard output 16 Hours
Wages rate per hour Rs 10
Units produced A=10, B=12 C=14 D=16 E yy per =20
The premium table is as under
Efficiency (%) premium (%)
67 to 70 5%
71 to 80 7%
81 to 90 10%
91 to 99 15%
100 and above 20%
If efficiency percentage is above 100, then for each one percent increase in efficiency
above 100% level an additional bonus is allowed.

● During work, Shree Pandav manufactured 300 articles. He received wages for 48 hours at
the rate of Rs 4 per hour. The estimated time to produce one article is 10 minutes and
under the incentive scheme, the time allowed is increased by 20%. Calculate his gross
wages according to:
1. piece work with the guaranteed weekly wage
2. Rowan premium bonus
3. halsey premium bonus.

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