Labour Costs

Direct and Indirect Labour

Those Making the products are DIRECT COSTS

Factory workers- direct labour

Factory supervisor - Indirect labour cost

Calculating Gross Pay

Spent time at work = time related pay

Work produced by employees= output releated pay

Annual Salaries

Paid to management, secretries etc

Hourly rate employee

Pay for each hour an employee works

Overtime

• Example: Time and a half

• More hours than contracted i.e. 35 hours a week

Overtime Premium

• Over and above the normal hourly rate

• Time and a half

• HALF = PREMIUM

OVERTIME PREMIUM CALCULATION

• HALF THE HOURLY RATE TO WORK OUT OVERTIME PREMIUM AMOUNT

• half hourly rate x hours worked = overtime premium

OVERTIME CALCULATION = time and a half

• Hours worked x £an hour x 1.5

Output related pay

• Fixed amount paid per unit for of amount of products made regardless of the time spent.

• Produces a constant labour cost per unit

Piece rate with Guarantee

Employee does not reach goal of products made in certain time = still receive a guaranteed amount of salary.