LABOUR AND WAGE ANALYSIS At the end of the unit you will be able to :

1. LABOUR AND WAGE ANALYSIS At the end of the unit you will be able to :  1. Explain the procedure of employment and retirement 2. State the causes of employees leaving the company 3. Calculate the labour turnover rate 4.Explain the method of recording labour time

2. The Engagement Of Labour • The engagement of labour is delegated by the management to the personnel officer. The personnel officer carries out this work in response to a properly authorized request for employees received from departmental manager. • The procedure upon engagement of labour is as follows : • Notice is given to the department concerned. When the employee reports for duty he sees the personnel officer and is given a copy of the work rules. • Notice is given to the wages office. This notifies them of the new employee’s name, the date of commencement, department, rate of pay and clock number.

3. TERMINATION OF EMPLOYMENT •  When an employee leaves his employment for any reason, the personnel officer should seek to find out that reason. The employee should give a prior notice for resignation. WHAT IS THE COST HAVE TO BE INCURRED WHEN LOSING A STAFF ??

4. WHAT IS THE REASON OF QUITTING ?

6. COST OF LABOUR TURNOVER Preventive Costs  Preventive costs include all the costs which are incurred to prevent workers from leaving the organisation and keeping them satisfied. Example : ?? Replacement Costs  Replacement costs include the costs which are incurred for the recruitment and training of new workers. Examples : ?? Are u ready to proceed…?

7. Examples of preventive costs : a). A personnel departments incurs costs on recruitment, selection, training and other things related to employment.b) The cost incurred for providing medical benefits to the worker.c) Welfare include facilities like sports, transport, canteen and housing.These facilities will prevent workers from leaving.

8. Some examples of replacement costs :a). The increase in costs of the personnel department due to the recruitment of new workers.b). The lost of production time as the new workers need to be given training.C). The inefficiency of new workers and will affect production.d). Costs of breakages of tools and equipment due to inexperienced workers.

9. LABOUR TURNOVER RATEAny changing of employees cause loss to a manufacturer. Labour turnover is the rate at which employees leave employment at the factory. Labour turnover can be calculated as below as :The average of employees leaving + replace for the year X 100 The average number of employees for the year ****(The no of employee at beginning of period + the no. of employees at the end of period) / 2

10. Example 5.1 :This information is extracted from Number One Company relating its employees for the year ended 2009 :The number of employee employed on 1.1.2009 is 120. During the year, 24 new employees were employed and 18 left.You are required to calculate :a. The number of employees on 31.12.2009b. Labour turnover rate

11. Solution to Example 5.1The number of employees on 31.12.2009No. of employees at 1.1.2009 120+ New employees 24- Employees left 18126Labour turnover rate = (24 + 18 )/2 ---------- X 100% (120 + 126)/2 = 17.07%

12. Lets try out some exercise :Question 1 : You are required to calculate : a. The number of employee at the end of the period b. Labour turnover rate for each department Try out more exercise in your module…pg 10 And pg 21

13. TIME KEEPING RECORDS1. Time Based- based on punch card report2. Output recorda) Daily and weekly time sheets. These are records, filled in by the worker and countersigned, which show how he spent his time during the day.

14. b) Job cards. A job card relates to a single job or batch and is likely to contain entries relating to numerous employees.c) Operating cards. These cards are also known as piecework tickets, are provided for each operation. So each operation will have at least one card. Refer to your module for sample of time sheet, job cards and Operation Card

15. 1.Remuneration : Time Based • Employee paid based on working hours • Eg : Alan worked for 40 hours /week. Hourly rate of pay is RM 1. Calculate his gross salary. Solution : Gross salary = 40 h x RM 1 = RM 40.00

16. 2.Remuneration : Piece Work • Employee paid based on units produced/output • The more he produce, the more he will get the salary • Eg : Alan produced 100 units. He will be paid RM 1/unit. Solution : Gross salary = 100 units x RM 1 = RM 100.00

17. 2.Remuneration : Piece Work ( cont.) • Company can varies the piece work scheme in order to increase production. a). Piece Work with guaranteed daily rate Eg : Alan produced 38 units. Guaranteed minimum rate is RM 40/day when the output is less than 40 units/day. Rate/unit is RM 1. Calculate the gross salary if : * production unit = 40 units * production units = 50 units

18. 2.Remuneration : Piece Work ( cont.) b). Differentiated Piece Work Rate Example 1 : Alan produced 200 units. He will be paid as follows : Up to 100 units = RM 0.50/unit 101 – 150 units = RM 0.60/unit 151 – 200 units = RM 0.70/unit Calculate the gross salary

19. Example 2 : Alan produced 180 units. He will be paid as follows : Up to 100 units = RM 0.50/unit Every next 50 units will increase RM0.20/unit. Calculate the gross salary

20. Question 1:AziraSharizaZarizaUnit produced 300 280 240Time taken (hour) 26 32 30Hourly Rate of Pay RM1.15 RM1.20 RM1.25Rate/Unit (RM) RM0.15 RM0.20 RM0.30Time allowed/unit 7 minute 9 12Calculate :Basic pay for each worker based on :a. Hourly rate of payUnit based

21. Question 2:Below are the information regarding 2 workers for a week. Total working hours is 40 hours.HadijaHaziraHRP RM3.20 RM2.75Output 180 150Calculate wages based on :a. Working hoursb. Piecework at RM0.75/unitc. Differentiate piecework based on rate : up to 100 units – RM0.60/unit 101-150 units – RM0.90/unit 151 units and above – RM1.20/unit

22. 3. Incentive Scheme What is incentive scheme ? Bonus will be paid for saved time Saved time = Allocated time – time taken Some of the incentive scheme : 1. Individual bonus scheme 2. Group bonus scheme 3. Profit sharing scheme

23. 3. Individual Bonus Scheme Under this scheme an employee is paid a basic rate per hour. If he completes his work in less than the ‘standard or expected time’, he earns a bonus. These scheme are : i. Halsey ii. Halsey-Weir iii. Rowan

24. i. Halsey Formula : Bonus = 50% x time saved x hourly rate of pay (HRP) Example : Amer is paid Rm2.00 per hour for an 8-hour day. In one day, he completes his job with standard times of 12 hours. Calculate his wages.

25. ii. Halsey-Weir Formula : Bonus =33 1/3% x time saved x hourly rate of pay (HRP) Example : EncikKamil is paid RM1 per hour. Time allowed is 50 hours. The time taken by him is 40 hours. Calculate his basic pay, bonus and his gross wage.

26. iii. Rowan Formula : Bonus = Time taken x time saved x HRP Time allowed Example 1 : EncikKamil is paid RM1 per hour. Time allowed is 50 hours. The time taken by him is 40 hours. Calculate his basic pay, bonus and his gross wage. Example 2 : Mimi is paid RM2.40 per hour and is given a job which has a standard time allowed of 12 hours what should be her bonus pay for the job, and total rate of pay per hour if the job takes 9 hours.

27. GROUP BONUS SCHEME Example 1 : Standard production in Factory XYZ is 24 units of bicycle per week. The Assembly Dept have 10 workers. If the production increase for 20%, bonus for RM60 will be paid. On the 10th day, 30 units are produced. Calculate bonus/worker. Answer : Increment (%) = 30 - 24 x 100% = 25% 24 Group bonus = 1.25 x RM60 = RM75 Bonus/worker = RM75/10 = RM7.50

28. Example 2 : Assembly Dept for Factory ABC have 5 workers. Standard production is 5 units/day. If the team can produce 8 units per day, bonus for RM80 will be paid. On the 2nd and 3rd day, the team were produced 12 units and 15 units respectively. Calculate bonus/worker. Answer : Day 2 : Increment (%) = 12 - 5 x 100% = 140% 5 Group bonus = 2.40 x RM80 = RM192 Bonus/worker = RM192/5 = RM38.40 Day 3 : Increment = (15-5)/5 x 100% = 200% Bonus = 3 x RM80 = RM240 Bonus/worker = RM240/5 = RM48.00

29. Exercise : • Glass Manufacturing Pvt Ltd has 4 group of workers that is Group 1, Group 2, Group 3 and Group 4.. Each group has 5 workers with hourly rate of pay is RM4.00. • Normal working hours for each worker is 8 hours per day for 5 days per week. Expected time ( standard time ) to finish an order for the groups is 65 minutes, 70 minutes, 70 minutes and 75 minutes respectively. • Standard time for an order is 10% more than the average of expected time taken by each group. • For Week 1 in January, Group 2 completed 40 customer’s order. • Calculate gross pay that will be received by a worker in G2 if the company practiced the following method of remuneration : • Incentive on time saved at RM5.50/h • Incentive based on Rowan Bonus Scheme • Incentive based on Halsey Bonus Scheme

30. Answer : Standard time for 1 order from customer : Average = (70+65+70+75)/4 = 70 minutes 10% more : 110% x 70 minutes = 77 minutes 40 orders : 77 minutes x 40 = 3080 minutes = 51.33 hours Time saved = 51.33 – 40 = 11.33 hour

31. a. Basic pay = 40 h x RM4 = RM160.00 Incentive = 11.33 h x RM5.50 = RM62.32 RM 222.32 b. Basic = 40 h x RM4 = RM160.00 Bonus = 40/51.33 x 11.33 h x RM4 = RM 35.32 Total RM 195.33 c. Basic = RM160.00 Bonus = 50% x 11.33 h x RM4 = RM22.66 Total wages RM182.66

32. OVERTIME • Working hours is MORE than normal working hours • Example 1 : • AN operator had an OT for 4 hours. He will be paid on the rate of 1.5 for his OT. How many hours will be paid as his OT. • Solution : • OT = 1.5 x 4 h • = 6 h

33. Example 2 : • AN operator worked for 4 hours as OT. Normal working hours is 40 hours. HRP is RM1.00. OT rate is 1.5 as per stated in offer letter. • Calculate : • OT premium • Total salary • Solution : • Premium OT = 0.5 x 4 h x RM1.00 = RM 2.00 • Total salary • Basic salary = 40 h x RM1.00 = RM 40.00 • OT = 1.5 x 4 h x RM1.00 = RM 6.00 • Total salary = RM 46.00

34. Exercise : HH Pvt Ltd is a factory producing car components is Semambu. This company has 30 workers in operational lines. HRP is RM 3/h with basic working hours 40 hours/week; with each worker is paid with guaranteed wages scheme RM120/week. If necessary, OT are allowed up to 15 h per week for each worker. This OT is paid at the rate of 2.5. Currently, standard time of car components is 6 units per hour for each worker. Recent study showed that each worker can actually produce more ie up to 8 units / hour. Hence, a new remuneration scheme will be implemented. The company will implement piece work remuneration scheme at RM0.55/unit. Range of production based on Budgeted Production Schedule are from 7000 units to 9900 units /week( maximum).Selling price is RM10/unit. Raw material cost at RM8/unit and total fixed overhead per week is RM9000. You are required to advise the management about the remuneration scheme applied.

35. You are required to : • Calculate labor cost that will be incurred at minimum production unit 7000 units and maximum production 9900 under both scheme ( existing and proposed new scheme) • Give advise to the management regarding the remuneration scheme. Why?

36. Solution :

37. b). How to advise ? Prove by total cost and effects on profit If life was easy, where would all the adventures be ? Good luck

38. b).Existing