# Important techniques of labour costing

In this article, we are trying to explain some important techniques and formulas to calculate labour cost, payroll and incentive wages.

## 1. Measurement of Labour Turnover

### (a). Separation method:

Labour Turnover = (No. of separations in a period / Average No. of Workers) x 100

LT = (NS / ANW) x 100

### (b). Replacement Method

Labour Turnover = (No. of replacements in a period / Average No. of Workers) x 100

LT = (NR / ANW) x 100

### (c). Flux Method

Labour Turnovber = (No. of separations + No. of replacements / Average No. of Workers) x 100

LT = (NS + NR / ANW) x 100

## 2. Labour Productivity

Labour Productivity  = Output / Actual Hours Worked

## 3. Labour Cost per unit

Labour cost per unit = Direct Wages / No. of units

## 4. Time Allowed

Standard Time + Incentive Allowance

## 5. Labour Efficiency

Labour Efficiency = (Actual output / Standard output) x 100

## 6. Time Rate Method

Earnings = Hours worked x Rate per hour

## 7. Straight Rate Method

Earnings = No. of units x Rate per unit

## Differential Piece Rate System

### 8. F.W Taylor’s System

Earnings = 80% of price rate when below standard

Earnings = 120% of price rate when at or above standard

### 9. Merrick Differential Price Rate System

 Output % Standard Payment Up to 83% Ordinary piece rate 83% to 100% 110% of ordinary piece rate Above 100% 120% of Ordinary Piece Rate

### 10. Gantt Task Bonus Plan

 Output % Standard Payment Output below standard Guaranteed time rate Output at standard 120% of time rate Output above standard 120% of ordinary piece rate

Earnings = Hours Worked x rate per hour + (500/100 x time saved x rate per hour)

E = HW x RH + (50 / 100 x TS x RH)

### 12. Halsey Weir Plan

Earnings = Hours Worked x rate per hour + (33 1/3% + time saved x rate per hour)

E = HW x RH + (33 1/3 / 100 x TS x RH)

### 13. Rowan System

Earnings = Hours worked x rate per hour + (Time saved / Time Allowed x hours worked x per hour rate)

E = HW x RH + (TS / TA x HW x RH)

### 14. Barth Variable Sharing Plan

Earnings = Rate per hour x √Standard hours x hours worked

E = RH x √SH x HW