Labour Costing

Labour is an essential factor of production. They make contribution to the  organisation through their time and energy. This needs adequate compensation to labour by way of wages for the work done by them which constitutes another important element of cost.

Labour is an essential factor of production. It is a human resource and participates in the process of production. The remuneration paid to labour is a significant item of cost. For costing purposes, labour may be classified into two broad categories

 (i) direct labour, and

(ii) indirect labour.

1 Direct Labour

Direct labour refers to labour engaged directly in the manufacture of a product or in a particular job. Some examples of direct labour are:

 a) Labour engaged in converting raw material into manufactured articles

b) Labour employed on a construction job

 c) Helper attending a machine-operator

d) Compositors working in a printing press

The main features of direct labour are as follows:

 1) 1t can be easily identified and allocated to cost units.

 2) It varies directly with the volume of output.

3) It can be easily ascertained and controlled because of its close proximity to the output. Wages paid to dircct labour are termed as 'direct labour cost' and forms part of prime cost.

2.  Indirect Labour

 There are a number of workers who are not engaged directly in the manufacture of a product or in a particular job. They may be employed as supervisors, repair workmen, inspectors, security man, foreman, cleaners, messengers, timekeepers, etc. or engaged in purchasing, stores, factory office or maintenance job

Wages and salaries paid to such staff are treated-as indirect labour cost which is included in overheads.

 The importance of distinction between direct labour and indirect labour lies in the fact that whereas direct labour can be identified with, and charged directly to, the product or a job, the indirect labour is not so identifiable and is, therefore, included in overheads which may be allocated to different products on some suitable basis.

TIME RECORDING

Recording of time has two purposes - time-keeping and time-booking. It is necessary for both type of workers: direct and indirect. It is necessary even if the workers are paid on piece basis.

TIME KEEPING-

Time Keeping is a system of recording the time of arrival and departure of workers. This provides a record of total time spent by the workers in the factory. It is on the basis of this record that their total entitlement for work under time rate system is determined.

Forms of Time Keeping

i) Attendance Time showing the total number of hours spent by each worker in the factory. This record is used for determining the amount of wages payable to the workers.

 ii) Job Time showing the number of hours spent on the jobs. This record helps in computing the labour cost for each job, product or process.

Purpose of Time Keeping

The purpose of time keeping is to provide information for

1) Preparation of pay rolls;

2) Calculation of labour cost per unit of operation, production or service;

3) Allocation of overhead cost based on wages or labour hours; 4) Attendance record of workers to meet statutory requirements;

5) Control of labour cost;

6) Determination of productivity of labour in the factory; and

7) Promotion of punctuality and discipline among the workers.

Methods of Time Keeping

 Attendance of workers in a factory on the basis of the time of their arrival and departure may be recorded through either, or a combination, of the following three methods-

HANDWRITTEN METHOD
Names of the workers are entered in an attendance register maintained for the purpose of time keeping and time iskept.

CHECK, TOKEN OR DISC METHOD
Under this method, metal discs bearing employee’s numbers allotted by the personnel department are placed on hooks on a board provided either at the gate or at the entrance of the department. On entering the factory, the worker removes the disc bearing his number from the board and places it in a box kept for this purpose. The box is taken away as soon as normal reporting time is over. A worker coming late will pick up the disc and put it in the “Late” box provided in the department. Such late box is normally changed every half an hour upto the maximum late attendance time allowed. The timekeeper records the attendance in the register on the basis of these discs.

MECHANICAL METHOD
The attendance cards are used in time clocks installed at the entrance of the factory. On entering the factory, the worker takes his card from ‘OUT’ racks and press it inside the clock, which will print arrival time in ‘IN’ column. He then places it in ‘IN’ rack of the department where he reports for duty. Late attendance is normally reported in red ink. Similarly, when the employee leaves the factory, he collects the card from the ‘IN’ rack and punches the time in the clock and keeps it in the ‘OUT’ rack. It is necessary that the timekeeping staff are present at the time of punching the cards to supervise the procedure. The clock cards are Collected by the timekeeping staff daily or weekly for recording in Statutory Attendance Register. Correct recording of attendance time is very important where wages are paid on the basis of time worked. Where payment is made by results, such as, by piece rate method, it would still be necessary to record correctly the ‘in’ and ‘out’ timings.

TIME BOOKING

Under time keeping methods we simply record the time spent by a worker in the factory. Such record does not show how that time was utilizEd by him i.e., how much time he spent on the jobs entrusted to him and for how much time he remained idle. Hence, in addition to recording his time of arrival and departure, it is also necessary to record the time he spent on each job, order or process. The system of maintaining such record is termed as 'time booking'. In other words, time booking is a method of recording time devoted by a worker on a job,order or process.

Purpose of Time Booking

The major purposes of time booking are:

To assist in ascertaining the cost of a job, order or process performed;
To check wastage of time by the worker after he enters the factory;
To assess the cost of idle time; and
To ensure that the time spent by the worker in the factory has been properly utilised.
Methods of Time Booking

The other methods of booking the time taken on separate jobs are:

1) Daily Time Sheets:

This is a record for each worker separately in respect of time spent by him on each job during the day. Daily Time Sheets" (also known as time cards) include details relating to:

 a) Name of the worker,

 b) Work Order Number,

 c) Description of Work,

d) Quantity Produced,

 e) Time of starting and finishing the job,

f) Total hours consumed on the job,

g) Rate of Wages per hour, and

 h) Amount of wages.

 2) Weekly Time Sheets: It contains similar details of the record of time for all jobs done by the workers during a complete week.

 3) Job Cards: It is prepared for each operation to be carried out on every order. This helps in computing the exact time taken by a worker on a particular job, operation or service. A job card authorises a worker to carry out the specified assignment. It also assists in having a correct allocation of wages to jobs, operations or processes.

As a matter of fact, time card (daily time sheet) and job card are similar in nature and content. Both help in ascertaining how each worker utilised his time while he was in the factory and enable the organisation to reconcile the time spent by the worker on each job with the time paid as per the attendance record. Another advantage of these cards is that they provide complete record as to the labour content of each job so that the computation of labour cost is greatly facilitated. The difference a between these two types of cards lies only in the form in which the analysis of worker's time is recorded. In time card the analysis of time is made with reference to each worker whereas in job card, the analysis of time is made with reference to each job.

Computation of Wages

 The gross wages payable to each worker are computed with the help of Time Sheets, Job Cards, or Piece Work Cards. Under the time wage system, the amount of gross wages is calculated by taking into account the total number of hours worked multiplied by the hourly rate of wage payment, plus overtime premium.

For calculating the net wages payable to each worker, following deductions are usually made from the gross wages:  i) Fines and deductions for absence from duty ii) Damages or loss of goods or money iii) House rent and cost of other amenities or services - iv) Recovery of loans or advances _ v) Income tax vi) Provident fund vii) Welfare fund viii) Co-operative society dues ix) Life insurance premium x) Contribution to employees' state insurance xi) Deductions on the basis of court order or the directive of some other authority.

Preparation of wages Sheet

 The wages sheet (payroll) is a consolidated statement showing the gross wages, deductions and net wages payable to workers. It is prepared at periodical intervals according to the time of wage payment. Large concerns, these days make use of computers for preparing the wages sheets. A wages sheet should generally contain the following information: 1) Name of the Department 2) Period-Month/ Week 3) Worker's Number 4) Name of the Worker 5) Number of Hours worked 6) Normal Hours of Duty 7) Overtime Hours 8) Bonus Earned 9) Rate of Payment 10) Gross Wages plus Allowances 11) Deductions 12) Net Wages Payable

Purposes of Payroll Accounting

 Payroll Accounting system helps the organisation in

 1) Providing relevant data for cost control;

2) Determining the net amount of wages payable to each employee individually;

3) Knowing the total amount of wages payable by the organisatiog weekly, fortnightly or monthly for the different departments of the unit;

4) Minimising the possibilities of errors and frauds in wage payments; and

5) Issuing pay slips to every worker showing in detail the amount of gross wages and the deductions made therefrom for ascertaining the net amount payable for the period.

IDLE TIME

Idle time is a period or duration for which workers have been paid but they have not worked towards production in the factory. This is a wastage which needs some effective control so that payment of wages without actual work may be minimised. Idle time may be of two categories:

(i) normal idle time due to unavoidable factors in the factory, and

 (ii) abnormal idle time caused by avoidable factors.

Treatment of idle time

Accounting Treatment of Idle Time

 Idle time cost arising due to normal and unavoidable causes should be charged as overheads and those due to abnormal causes should be charged to Costing Profit and Loss Account. Normal idle time such as loss in tool setting etc. can be charged at inflated rate. Jobs are charged at inflated rate.

OVERTIME

Overtime refers to the situation when a worker works beyond his normal working hours.

Causes of Overtime

 Overtime arises due to the following circumstances:

(a) for working due to seasonal rush;

 (b) for making up time lost due to unavoidable reasons;

 (c) for completing a job or order within a specified period as requested by the customer;

(d) for working due to policy decisions, i.e. when there is general pressure of work and labour shortage etc.

Treatment of Overtime premium in Cost Accounting

In cost accounting the treatment of overtime premium will be as follows:

1. If the overtime is resorted to at the desire of the customer, then the entire amount of overtime including overtime premium should be charged to the job directly.

 2. If it is due to a general pressure of work to increase the output, the premium as well as overtime wages may be charged to general overheads.

 3. If it is due to the negligence or delay of workers of a particular department, it may be charged to the concerned department.

 4. If it is due to circumstances beyond control, it may be charged to Costing Profit & Loss Account.

LABOUR TURNOVER

Workers often change their jobs for better prospects and better environment. In any organisation, therefore, there is a continuous flow of labour-some old ones are leaving and new ones are joining. Though it is a normal process, the frequent changes in the composition of labour affect the continuity as well as the productivity of the organisation. This, in turn, affects the labour cost. Hence, every effort is made to reduce the labour turnover, which is defined as the rate of change in the labour force of an organisation during a particular period. It can be measured by the following two methods:

Causes of Labour Turnover

 Factors which cause labour turnover can be grouped into two categories:

avoidable causes, and (ii) unavoidable causes.

Examples of avoidable cases of labour turnover are as follows:

 Workers and jobs not matching with each other , Low wages , Bad working conditions , Poor treatment by employers , Lack of job satisfaction ,Absence of planning and foresight in management, Psychological reasoiis Like nature, behaviour, habit of change, jumping preferences, militant attitude, etc. , Poor relationship with fellow workers , Unfavourable or odd hours of work ,Bad relationship with supervisors, Poor promotion policy , Inadequate protection against accidents,Discrimination between one worker and another, Lack of proper incentives, Absence of a sound recruitment and training policy,Lack of recreational and medical facilities

 Among the unavoidable causes of labour turnover are the following:

 Opportunities of better prospects ,Sickness, Accident or disability , Change of place of stay, Marriage ,Death,Retirement , Problems of accommodation and transport, Resignation, Retrenchment, Domestic problems and family responsibilities, Seasonal nature of the business , Shortage of raw materials, power supply, market demand, etc,

Measurement of Labour Turnover-

                Separation Rate Method - Separation during a given period

                                                           Average number of workers during the period

 (The average of workers is calculated by taking a simple average of workers at the beginning and end of the period.)

Net Labour Turnover Rate Method or Replacement Method-

Number of replacements during a given period X 100

 Average working force during the period 

Labour Flux Rate Method –

(Number of new employees during a given period) + (Number of separation during a period) x 100

(Average number of workforce during the given period)

Examples of Preventive Costs

 (i) costs of providing medical services; (ii) personnel administration cost; (iii) cost of labour welfare activities; (iv) costs incurred for providing pension, provident fund and retirement schemes.

Examples of Replacement costs

(i) Decline in output due to inexperience of new workers. (ii) Decline in quality due to the lack of experience of new workmen. (iii) Loss of output during the time lost while recruiting new workers. (iv) Cost of recruitment/selection. (v) Cost of training. (vi) Cost of tool, equipment and machine breakages. (vii) Waste, scrap and defectives arising due to lack of experience of new workers. (viii) Cost of accidents, compensation paid, damage to property, assets etc.

Effects of Labour Turnover

 A high rate of labour turnover means that workers often leave and do not stay for long. Old workers generally possess more experience than new workers. Replacement.of workers, therefore, declines the overall efficiency. Moreover, the engagement of new workers needs recruitment and training which involves additional cost. This gap between the old and the new labour often brings down both the quality and quantity of output.

 Undue labour turnover, thus, involves an additional cost to the organisation owing to:

1) Cost of recruitment of substitute workers;

2) Cost of training new workers;

3) Cost of decline in production due to reduced efficiency and disturbed schedule;

 4) Loss on Account of defective work and increased wastage in production;

5) Breakage of tools and equipment due to mishandling by new workers; and labour;

6) Wastage of materials in handling by new workers. The overall effect of labour turnover, therefore, is a higher cost of production and lower profitability.

Control of Labour' Turnover

Since labour turnover is a loss to the organisation, every effort is required to minimise its frequency. Some of the measures to minimise labour turnover are:

1) Institute proper machinery to attend promptly to the grievances of workers;

2) Create congenial working conditions in the factory;

3) Provide adequate welfare facilities to the workers;

 4) Improve employees' morale;

5) Give opportunities for workers' participation in management;

6) Follow a suitable policy of promotion and transfers; and

 7) Develop a sound system of recruitment and training.

METHODS OF WAGE PAYMENT

Principles of an Ideal Remuneration System

 The following principles should be adopted for an ideal wage system

1. Differences in pay should be based on differences in job requirements.

2. Follow the principle of equal pay for equal work.

 3. The scheme should be based on work study, and the work contents of various jobs should be stabilized.

4. Recognize individual differences in ability and contributions.

5. The scheme should not be very costly in operation.

 6. The scheme should be flexible.

 7. The scheme should encourage productivity.

8. The scheme should not undermine co-operation amongst the workers.

 9. The scheme should be sufficient to ensure for the worker and his family reasonable standard of living.

BASIC METHODS OF REMUNERATION SYSTEM

 (1) Time Rate System

The time rate or day rate is related to the hours of wage and is commonly used. The wage rate can be fixed on hourly, daily, weekly, fortnightly or monthly basis depending on the nature of his skill.

This method can be applied in the following circumstances:

(a) The quality of work is more important;

 (b) The output of a worker cannot be measured;

(c) Where output of a worker is not in his control;

(d) Where the work can be closely supervised;

 (e) Where increase in output is negligible compared to the incentive.

A few variations of this system are in use.

 They are:

 (a) High Wage Plan:

Compared to the wage rate prevailing in the region, a higher time rate is fixed. This is done to attract efficient workers so that output is high. To enable the workers to achieve the standard, suitable working conditions are created. Unsuitable or inefficient workers are taken off the scheme. The employer benefits because overheads and wage costs per unit are reduced. This scheme is suitable when high quality and productivity are required. But it should be possible to set up standards and measure the output.

(b) Different Time Rates:

 For different levels of efficiency, different rates are fixed. For efficiency upto the standard level, normal wages are paid and for efficiency beyond the standard level, the rate is gradually increased. This is similar to differential piece rate system.

(c) Measured Day Work (Graduated):

The hourly rates are divided into two parts. One part is the fixed part which depends on the nature of the job and the other part is variable depending on the merit rating and cost of living. This system is very complicated. The calculations involved increase when the workers change jobs frequently. Merit rating may be arbitrary. There is multiplicity of rates. The workers do not easily understand the system. Because of all these factors this system is not popular.

(2) Payment by Results

Payment by results is a method of paying wages which depends on the output or units produced by the worker. The worker can increase his income by producing more units. The main classifications of payment by results are:

 (i) payment is directly proportionate to the worker’s production; for example, straight piece work system;

(ii) payment proportionately increases as the production increases, like the differential piece-work system;

(iii) the rate of payment decreases as output increases e.g. premium bonus methods;

(iv) the payment varies at different levels of production like the accelerated premium method. (a) Piece Rate System-  The wages are paid on the basis of the output of workers, i.e., on the basis of quantity of output. It is simple and common method of wage payment. The worker is paid on the basis of his work, not taking into account the time involved. The wage is calculated as follows:

 Wage = Number of units produced x Rate per unit.

 The piece rate can be applied in the following cases:

 (a) the work is of standard or repetitive nature;

 (b) piece rate can be easily fixed;

 (c) there is uninterrupted flow of work;

(d) it is necessary for the employer to get maximum production; and

(e) quantity of output depends on effort and does not require skill.

(b) Piece Rate with Guaranteed Time Rate

 A certain level of output is determined. Workers are paid on the basis of output. If the output is less than the standard, the worker is paid on time rate basis. Thus, this system incorporates the merits of the time rate and piece rate system and eliminates the demerits of them. But it is very complicated and misunderstandings may arise

INCENTIVE SCHEMES

Both time rate and piece rate systems have their merits and demerits. Incentive system attempts to combine the good aspects of both systems. The main objective of incentive plan is to induce a worker to produce more to earn a higher wage. Producing more in the same period of time should result in higher pay for the worker. Because if greater number of units produced, it should also result in a lower cost per unit for fixed factory cost and also for labour cost.

CLASSIFICATION OF INCENTIVE SCHEMES

Incentive schemes can be classified as follows:

 (a) Differential piece rate

 (b) Premium bonus schemes

(c) Group bonus plans

 (d) Bonus schemes for indirect workers.

(A) DIFFERENTIAL PIECE RATE

This system is suitable where:

 (a) the methods of working are standardised;

 (b) the workers do the same job over a long period;

(c) the nature of work is repetitive;

 (d) output of each person can be measured;

(e) the standard time for each job can be determined with precision.

Taylor’s Differential Piece Rate System

F.W. Taylor (known as the father of scientific management) originated this scheme. No minimum wage is guaranteed. The standard output is determined on the basis of time and motion studies. Wages are calculated on the basis of two widely different piece rates. Those attaining or crossing the standard get a higher piece rate and those not attaining it get a lower rate.

The lower rate is based on 83% of the day wage rate. This rate is applicable to those who don’t attain the standard. The higher rate is based on 125% of the day rate and an incentive of 50% of the day rate.

The efficiency of a worker can be determined either by comparing standard time and actual time taken or by comparing actual output and standard output. Hence, this system penalises the slow worker and rewards the efficient one.

 This principle is based on the fact that slow production increases the cost of production.

 If the wage rate is = Rs. 1 per unit The low piece rate will be = 1 x 83% = Rs. .83  per unit The high piece rate will be = 125% x 1+ 50% x Rs. 1 = Rs. 2.08 per unit.

Merrick’s Differential Rate Scheme (Multiple Piece Rate System)

The main features of this system are as follows:

 a) It is a multiple piece rate system.

b) All workers under this scheme are paid only on the basis of their output.

c) Time Rate wages are not guaranteed to the workers; they are paid on the basis of their efficiency.

Efficiency level Piece rate

Upto 83% - Normal rate

83% to 100% - 110% of normal rate

Above 100% -120% of normal rate.

The performance below standard is not penalised.

Gantt’s Task and Bonus Plan

 Under N.L. Gantt’s scheme, time wages are guaranteed to every worker. Standards are set. Bonus is generally 20% at 100% efficiency. If a worker takes the standard time to perform the task (100% efficiency), he is given wages for standard time and bonus of 20% on wages earned. If the worker completes the task in less than standard time he is given wages for the standard time (for actual output) and a bonus of 20% of the wages for the standard time. A high piece rate may also be offered for performance above 100% efficiency.

Baum’s Differential Scheme (Milwakee Scheme)

It is a combination of Halsey and Taylor’s differential piece rate system. This system provides incentives at different levels of efficiency.

(B) PREMIUM BONUS PLANS

Emerson’s Efficiency (or Empiric) System

 Though minimum daily wages is guaranteed, efficiency is also rewarded. Standard is set based on the time and motion study. Bonus is payable when efficiency reaches 66-2/3% and increases as the output increases.

 Levels of Efficiency                               Piece Rate

 66-2/3%                                       Guaranteed time rate

 90%                                               Time rate + 10% as bonus

100%                                             Time rate + 20% as bonus

above 100%                                Time rate + 20% as bonus + additional bonus of 1% for every increase of 1% beyond 100% efficiency

The bonus is usually calculated on the efficiency achieved for all the jobs in a wage period taken together.

                Efficiency % = Standard time for all jobs done in a period × 100

                                           Time taken for doing all jobs in a period

Halsey plan

 Under this plan originated by T.A. Halsey, time rate is guaranteed. Standard time and work are predetermined. The bonus is 50% of the standard time saved.

Total wages = Time taken x Hourly rate + 1/2 (Time saved) x Hourly rate.

 Halsey Weir plan

 The bonus under this plan is 33-1/3% of the standard time saved.

 Total wages = Time taken x Hourly rate + 33-1/3% (Time saved) x Hourly rate

 Rowan Plan

 The time rate is guaranteed under the plan originated by J. Rowan. The percentage of bonus to the wages earned is that which the time saved bears to the standard time.

Total wages = Time taken x Hourly rate + (Time taken/ Standard time )xTime saved ×  Hourly rate

Comparison of Halsey and Rowan Plan

 If the worker finishes the work in half the time fixed for it, the result under Rowan and Halsey plan will be same. If the time saved is less than 50% of the standard time, the Rowan plan is better. If time saved is greater than 50% of the standard time, the Halsey plan is better.

Bedauxe Point System

Under the scheme originated by C.E. Bedauxe, time wages is guaranteed. Earnings increase after the worker attains 100% efficiency level. Standard time and standard work is measured in terms of Bedauxe points, which are also known as B’s. ‘B’ means a standard work performed in a standard minute. In other words, one ‘B’ unit represents the amount of work which an average worker can do under normal conditions in one minute allowing for the relaxation needed. Workers get a bonus which is equal to 75% of B’s saved.

 Bonus = B’s saved × Hourly rate/60 X 75

Thus, if a person gets 90 B’s and hourly rate is Rs. 1.20, then his bonus will be:

 B’s saved = 90 − 60 = 30 B’s

 Bonus = 30 × 1.20/60 x 75/100 = 45 paise

If bonus is given to the extent of the value of the entire time saved, then the scheme will be called the 100% Bedauxe Scheme. But if nothing is mentioned, it is assured that it is 75% Bedauxe Scheme.

Under 75% Bedauxe Scheme, the labour cost increases till 100% efficiency and then starts declining.

Under the 100% Bedauxe Scheme, the labour cost remains constant after the 100% level is reached.

 Hayne’s Scheme

 Time wages are guaranteed. The standard time is set in terms of standard man minutes called ‘manits’. A manit means a standard work performed in a standard minute. Bonus is given for the time saved. The value of the time saved is shared by the worker and foreman in the ratio of 5 : 1 if the work is standardised and repetitive in nature. Otherwise, the ratio of sharing between worker, employer and supervisor will be 5 : 4 : 1. The labour cost falls until 100% efficiency is reached. Thereafter, it falls at a decreasing rate if work is nonstandardised or remains constant if the work is standardised. Barth’s Scheme This scheme does not guarantee wages. Under this scheme,

Total wages = Hourly rate 

 Total wages is higher for less efficient people. As the efficiency increases, the earnings decrease. Hence, this plan is suitable for beginners and trainees. Since it is complicated, workers cannot understand it. Moreover, it does not encourage efficient workers.

Diemer Scheme

 It is a combination of Halsey’s and Gantt’s schemes. A straight line increasing incentive is given beyond 100% efficiency.

(C) GROUP BONUS PLANS

 There are certain jobs which have to be performed collectively by a group of workers. The ultimate production depends on the efficiency of the whole group. Under group bonus plans, payment is made by results to all the workers in the group. Bonus may be shared equally or in different proportion according to the levels of skill required. These proportions may be based on time rates or some previously agreed ratios. These plans may increase production and reduce costs per unit. It creates team spirit. But efficient and inefficient workers are rewarded alike. Efforts and rewards are not properly linked.

These plans can be used where:

(a) it is required to reward both direct and indirect workers;

 (b) output depends on team work;

 (c) it is desirous to create team spirit; and

 (d) it is not possible to measure the output of an individual person.

The following are some of the group bonus plans:

(i) Priestman Production Bonus Plan

 For each department, the standard output and standard time are calculated. Bonus is payable to the department in which actual output is greater than standard output. The bonus is given on the basis of the percentage by which actual output exceeds the standard output.

 (ii) Cost Premium System

 Payment is made on an agreed basis, for any costs saved, for the factory as a whole. Bonus is dependent on output and also the economy effected in the use of materials and services. But this system is not very common and there is no direct relation between the incentive and the efforts of the workers.

(iii) Rucker’s Plan (Share of Production Plan)

The ratio of earning and added value is calculated. Added value is the change in the market value because of change in form, availability or location of the product. Any reduction in this ratio increases the wages.

 (iv) Scanlon Plan

This is similar to Rucker’s plan but the meaning of ‘added value’ is different. Bonus depends on the ratio between earnings and production achieved at selling price.

 (v) Towne Gain Sharing Plan

Bonus depends on the reduction in labour cost as compared to the standard set. In addition to wages earned, half of any saving in cost is paid to workers and supervisors.