This document discusses labour costing and improving labour productivity. It defines labour cost as the amount paid to workers including basic pay and fringe benefits. It then discusses why labour cost is important for maximizing productivity and profitability. Various incentive plans like piecework, time rates, and bonuses are presented as ways to improve productivity by motivating workers to produce more. The economic impacts of increased productivity such as reduced costs, inflation, and unemployment are also summarized.

1. LABOUR COSTING
Group Members
Azra Syani
Sajeel Bhatti
Hassan Ahmad

2. OPENING / INTRODUCTION
 Labour cost represents the human contribution to production.
 Labour cost is a amount which is paid to worker or employee.
 Labour cost consist of Basic Pay and Fringe Benefits
Basic Pay
The pay according to worked performed by workers.
Fringe Benefits
It is substantial element of labour cost. It consist of employer share of
FICA Tex, Overtime Premium Pay, Insurance Benefits and pension
Cost, that should be added in labour cost.

3. WHY LABOUR COST IS
IMPORTANT
 For getting the maximum productivity
 For better output by the use of minimum resources
 It is useful for minimum waste of time, material and resources
 Increase the ability, efficiency and skill of workers.
 It is useful to increase the company competiveness & profitability.

4. HOW TO IMPROVE LABOUR
PRODUCTIVITY
 To provide employees handsome wages/incentive
 Offer to employees bonus and better workplace
 Encourage to employees to meet standard in production and get earn
more and higher
 Give to employees basic needs like safety, education, family protection
etc

5. INCENTIVE PLANS (ITS PURPOSE)
Primary Purpose
 Induce the worker to produce more
 Earn higher wages
Secondary Purpose
 Reduce unit cost

6. INCENTIVE WAGES PLAN
1. Straight Piecework Plan
2. Time Rate System Plan
3. Differential Piece Rate System Plan
4. Bonus System Plan

7. STRAIGHT PIECE RATE SYSTEM
In this system wages are paid on the basis of output/quantity
of work of workers.
Wages: No of Units Produced x Rate Per Unit

8. TIME RATE SYSTEM
In time rate system wages are paid on the basis of time
spent for worked in factory. In this system wages are paid
hourly, daily, weekly and monthly basis. It is also known
as day work, time work etc.
Wages: Total Hour Worked x Rate Per Hour

9. DIFFERENTIAL PIECE RATE
SYSTEM
This system is based on standard task where worker can
received increase or decreased piece rate by varies in
production that expected for standard time.
Wages: Units Produced x Differential Rate Per Unit

10. BONUS PLAN
The bonus plan is allowed standard time for completing a
job/unit, in this system bonus is allowed on time saved in
addition to regular earning.
Wages: (Hour Worked X Rate Per Hour) + (Time Save x
Rate Per Hour)

11. ECONOMIC IMPACT OF
PRODUCTIVITY
When productivity increase
 Business profit increase
 Real earning increase
 People purchasing power increase etc
At meantime Demand increase, supply increase, people spend more, and
positively unemployment fall/goes down.
According to Congressional Joint Economic Committee said 01 percent in
productivity growth will reduce inflation by at least 2.1 percent.

12. LABOUR COST PROCEDURES
 Employment history like date of hired, wages rate, initial assignment,
promotions, sickness and vocation
 Productivity and types of wages and compensation for work
 Each worker time worked, wages rate and total earning for each payroll
period
 The deduction from gross wages for each worker
 Total labour cost in each department for each payroll period etc

13. QUESTION/ANSWER