PART 3- 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
Timothy works 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
P50.00 per hour. The following details
relate to the job completed during week
ended 31 May 2024:
Timothy
Job 83PJF component VD60 120 units
Hours worked job 83PJF 38 hours
Hours booked to idle time 2 hours
Hours attended to be paid 40 hours
Allowed time per unit of VD60 25 minutes
Required: Calculate
a) the amount of bonus payable
b) the total gross wage
Workings
1. Since Timothy 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 P50.00 per hour= P300.00
b) the total gross wage
Basic Pay (38 hours x P50.00) P1 900.00
Idle Pay (2 hours x P50.00) 100.00
Bonus 300.00
TOTAL GROSS WAGES P2 300.00
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
acompany's record of its employees' salaries and
wages, bonuses,
bonuses allowances to derive total earnings,
and other deductions (employees share of Medical
aid, pension fund and withheld taxes to derive their
net pay.
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
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.
P
e 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, Alexander Forbes, AON, etc).
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 Deductions
Tax
Other deductions e.g
Pension Contribution- calculated on basic salary
Medical Aid Contribution- also calculated on
basic salary
Union Contributions
Insurance premium (car, home, life Insurance)
etc
Question on payroll-
Yellow Khakhi has four employees.
Allowable hours are 40 hours a
week and they are paid on a
biweekly basis with overtime paid
for all hours worked above
allowable hours. The overtime rate
is 1½ times the regular rate of pay.
The payroll information is as follows.
Employee Employee Rate per Marital Allowance Union
per month
Number Hour Status Member
(BWP)
Judy Toy
111 P15.5 Single 400 No
0
Tim Moss
112 P16.2 Married 280 Yes
0
Jennifer Ben
113 P15.9 Married 280 Yes
0
Gail Job
114 P17.0 Single 280 Yes
0
During the period ending August 16 2024, Jennifer
worked 78 hours, Tim worked 86 hours, and Judy and
Gail each worked 72 hours. The income tax is deducted
at 12% of the gross earnings. Compute mandatory
pension contribution of 7.50% and Medicare Aid
contribution of 5%. Union member pay weekly dues of
P10.00.
Required
Prepare a payroll register for the two weeks duration
ending August 16, 2024. List employees in alphabetical
order by using last name.
Note:Pension and medical aid
contribution are a percentage of
the basic salary.
Taxcalculation= (Total earnings
minus pension contribution) X Tax
rate.
