Chapter 3 - Labour Costs Flashcards
What are labour costs ?
Labour costs are one of the elements of costs that cover the costs of wages and salaries for all of their employees ( E.g the money it has to pay its employees )
Give three factors that affect labour costs ?
( How much a business pays its employees )
- wage rates paid by other businesses
- comparisons with national wage rates
- national minimum living wage rates
- government incentives to take on additional employees
- local employment conditions ( AKA high or low employment in the area where the business is based )
What type of employee would fall under direct labour costs ?
Employees that work on a production line or are involved in assembly of a product
Employees that are involved in the output of a service business
What are the three main payment methods for direct labour ?
1) Time rate
2) piecework rate
3 ) bonus system
payment methods for direct labour
What is the time rate payment method ?
This is where an employee is paid based on the time they spend at work
payment methods for direct labour
What is the piecework rate method of payment for employees ?
The employee is paid an agreed sum for each task carried out or each unit of output completed
payment methods for direct labour
What is the bonus system method of payment for employees ?
The employee is paid a time rate and then receives a bonus if the output of the employee is better than expected
List three ways an employees work done can be recorded.
- time sheets
- clock cards
- piecework tickets
- job cards
- route cards
- computer cards
Methods of recording work done
How does a time sheet work ?
Typically an employee would record their own hours worked. This can be on a spreadsheet or something physical that is capable of recording.
Methods of recording work done
How does a clock card work ?
This is where an employee can clock in and out of work. This is typically done with some type of electrical system where the employee has their own card specific to them.
Methods of recording work done
What type of employee usually uses piecework tickets ?
employees who work on a batch of output
What are the qualities of a good labour payment method ?
It should be related to effort and fair to all staff
The method should be easy to manage and administer
Payments made at regular intervals
The principles of the scheme should remain constant
When Production-line Employees work overtime they are usually paid at a rate ____________ their usual time rate.
Above
What is the additional money a employee is paid for overtime called ?
Overtime premium
Is Overtime Premium charged to Direct Labour Costs or Indirect Labour Costs ?
Indirect Labour Costs
