LABOUR CONTROL
Bonus Pay Systems
Bonus pay is compensation over and above the amount of pay
specified as a base salary or hourly rate of pay.
Bonus systems are payment systems designed to increase
production by the awarding of incentives to productive employees
who produce output during the designated time (standard time
allowed).
Why Pay Out Bonuses?
Efficient workers save the organization time and improve
efficiency. They should be rewarded for this.
The bonus is a thank you to efficient employees.
Cont….
It is usually at 50 % or so that the saving is shared
with the organization.
Bonus pay is also used to improve employee
morale, motivation, and productivity.
When you tie bonuses to improve performance
which in turn helps the company reach its goals.
Example
Motheo is machine operator in a company which
manufactures components for printers. The basic
working week is 40 hours and overtime is paid at
normal + 50%.
The company operates a bonus scheme. 50% of the
hours saved against a standard time allowed are paid
at the basic rate of P6 per hour. The following
details relate to the job completed during week
ended 31 October 2016:
Motheo
Job 908C component D224 120 units
Hours worked job 908C 38 hours
Hours booked to idle time 2 hours
Hours attended to be paid 40 hours
Allowed time per unit of D224 25 minutes
Required: Calculate
a) the amount of bonus payable
b) the total gross wage
Workings
1. Since Motheo worked 40 hours (38 hours + 2 idle hours), there is no
overtime.
2.
Time allowed for output is 25 minutes x 120 units = 3,000 minutes
3,000 minutes /60minutes = 50 hours
Time Taken = 38 hours, do not consider idle time
Therefore Time Saved = 12 hours
Cont.. for Motheo
Bonus-hours 6 (50 % or ½ the hours saved)
Bonus payment 6 hrs x P6.00 per hour= P36
b) the total gross wage
Basic Pay (38 hours x P6.00) P228
Idle Pay (2 hours x P6.00) 12
Bonus 36
TOTAL GROSS WAGES P278
Payroll Accounting
A payroll is a company's list of its employees, but the term is
commonly used to refer to:
the total amount of money that a company pays to its employees
a company's records of its employees' salaries and wages,
bonuses, allowances to derive total earnings,
and other deductions (employees share of Medical aid, pension
fund and withheld taxes to derive their net pay.
Pay As You Earn (PAYE)
It is a system by which income tax is levied on wage
and salary earned.
The income tax is deducted from the employees gross
salary and is paid by employers directly to the tax
department.
Payroll Accounting- Labour
Payroll and benefits include items such as:
Salaries / wages
bonuses & commissions to employees
overtime pay
employer paid benefits e.g insurance, sick days,
retirement plans
Question on payroll-
Hot Guys Car Wash has four employees. They are
paid on a weekly basis with overtime paid for all
hours worked over 40 in a week. The overtime rate
is 1½ times the regular rate of pay. The payroll
information is as follows.
Employee Employee Rate per Marital Allowance Union
(BWP)
Number Hour Status Member
Joyce Tedu
107 P6.40 Single 20 No
Tom Matho
108 P7.22 Married 15 Yes
James Bruce
109 P6.70 Married 15 Yes
Gail Job
110 P7.80 Single 15 Yes
During the week ending October 9, Joyce worked 39 hours,
Tom worked 43 hours, and James and Gail each worked 36
hours. The income tax is deducted at 12% of the gross earnings.
Compute mandatory pension contribution of 6.2% and
Medicare Aid contribution of 2%. Union member pay weekly
dues of P4.50.
Required
Prepare a payroll register for the week ending October 9. List
employees in alphabetical order by using last name.
Basic Pay
Defined:
Is a fixed or ordinary amount of salary that an
employee is eligible for in return of the work he / she does.
It includes the normal rate pay for any overtime pay (the
direct labour part), but not the overtime premium (indirect
labour part).
It does not include benefits, bonuses or any other
potential form of compensation from the employer.
Gross Earnings
Gross earnings is the total compensation earned by
an employee.
It consists of wages or salaries, plus any bonuses,
overtime pay and commissions.
Gross earnings are subjected to tax (taxed at a
certain rate).
The difference between gross pay and the amount
actually received is attributable to payroll
deductions.
Pension (retirement) Contributions
A pension plan is an agreement whereby an employer
provides benefits to employees after they retire.
The employer usually the sponsors the pension plan, but
employees can also pay an additional amount to the
pension plan.
Pension contributions are not taxed when deducted
monthly from the employee, but will likely be taxed
when the employee retires.
The contributions are paid / sent by the employer to
pension administrators (such as Botswana Life, AON,
etc).
Pension contributions are calculated on basic pay.
Payroll Deductions
Tax
After –Tax Deductions
Pension Contribution
Medical Aid Contribution
Union Contributions
Insurance premium (car, home, life Insurance) etc
RATE Pension Total
PER Basic Allowan Over Total Contributio Medicare Union Deductio
OYEE HOUR Earnings ce time Earnings PAYE n [P] [P] n [P] Net Pay [P
6.70 241.20 15 256.20 28.95 14.95 4.82 4.50 53.22 202.98
7.80 280.80 15 295.80 33.40 17.41 5.62 4.50 63.02 ?
T 7.22 310.46 15 10.83 336.29 ? 19.24 6.20 4.50 70.29 ?
6.40 249.60 20 - 269.60 32.35 15.48 4.99 - 52.82 ?
1,082.06 65 10.83 1157.89 138.95 67.08 21.63 13.50 241.14
