Labour Cost Accounting

Labour Cost Accounting
Principles of an Ideal Wage System
The following principles should be adopted for an ideal wage system
(1) Differences in pay should be based on differences in job requirements.
(2) Follow the principle of equal pay for equal work.
(3) The scheme should be based on work study, and the work contents of various jobs should be
stabilized.
(4) Recognize individual differences in ability and contributions.
(5) The scheme should not be very costly in operation.
(6) The scheme should be flexible.
(7) The scheme should encourage productivity.
. (8) The scheme should not undermine co-operation amongst the workers.
(9) The scheme should be sufficient to ensure for the worker and his family reasonable standard of
living.
Method of Remuneration
There are two basic methods of wage payment: (1) Time Wage System and (2) Piece Wage System.
Under time wage system. wages are paid on the basis of time spent on the job irrespect of the amount of
work done. This is known as Time Rate or Day Wage System. The unit of time may be a day, a week, a
fortnight or a month. Under piece wage system, remuneration is based on the amount of work done or
output of a worker. This is known as "Piece Rate System" or "Payment by Result." Thus. a workman is
paid in direct proportion to his output. A variety of bonus and premium plans have been designed to
overcome the drawbacks of two basic methods of wage payments. A system of incentive plans also takes
into consideration the primary principles of these two basic plans known as Incentive or Bonus or
Premium Plan.
The following are the important methods of remuneration which may be grouped into :
(1) Time Rate Systems
(2) Piece Rate Systems
(3) Bonus System (or) Incentives Schemes.
(4) Indirect Monetary Incentives.
These may be further classified as under:
(1) Time Rate Systems:
(a) At Ordinary Levels
(b) At High Wage Levels
(c) Guaranteed Time Rates.
(2) Piece Rate Systems:
(a) Straight Piece Rate
(b) Piece Rates with Guaranteed Time Rate
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