Presentation by Group 1

Accounting
for Factory
Labor
What is Labor and
Labor Cost?
Labor is the physical or mental effort invested in the
production of a thing.

It includes more than just the wages paid to an employee.

It also includes benefits such as employers' contributions to
SSS, Philhealth, and Pag-ibig, vacation time, and holiday pay.
Labor Cost
Direct Labor Cost
01 the amount of wages paid to workers who
are directly involved in the manufacturing
operation

Indirect Labor Cost

02 the amount of wages paid to workers who
are not directly involved in the production of
goods or services.
 Wages Plans used by
companies
Hourly-rate plan Modified Wage Plan
01 definite rate per hour is set for each 03 combination of hourly-rate and piece-
employee (rate per hour x no. of hours rate plans
worked) Daily-Rate plan
Piece-rate plan
04 definite rate per day per employee
02 definite rate per output per employee
(rate per day x no. of days worked)
Shift Premium and Night Premium
(rate per output x no. of output 05 the work schedule of some manufacturing
worked)
companies is not the usual 8 hours work
starting from 8am and ends at 5pm
 04 of 15
Labor Code of the Philippines :
Provisions of PD 442
The normal hours of work of any employee shall not exceed eight (8) hours a day. It includes:
all time during which an employee is required to be on duty or to be at a prescribed
workplace and all time during which an employee is suffered or permitted to work.
Employees have right to a weekly rest day. When an employee is made or permitted to work
on his scheduled rest day, he shall be paid an additional compensation of at least 30% of
his regular wage. Where such holiday work falls on the employee’s scheduled rest day, he
shall be entitled to an additional compensation of at least 50% of his regular wage.
Every worker shall be paid his regular daily wage during regular holidays which should a
compensation that is equivalent to twice his regular rate.

 NATIONAL HOLIDAYS
REGULAR HOLIDAYS SPECIAL (non-working) DAYS
Proclamation No. 1236, issued on 29 October 2021
New Year's Day 01 January
Araw ng Kagitingan 09 April Chinese New Year 01 February
Maundy Thursday 14 April EDSA People Power 25 February
Good Friday 15 April Revolution Anniversary
Labor Day 01 May Black Saturday 16 April
Eidl Fitr Movable Date Ninoy Aquino Day 21 August
Independence Day 12 June All Saints' Day 01 Novermber
Eidl Adha Movable Date Feat of Immaculate 08 December
National Heroes' Day 29 August Conception of Mary
Bonifacio Day 30 November SPECIAL (Working) DAYS
Christmas Day 25 December
All Souls' Day 02 November
Rizal Day 30 December
Christmas Eve 24 December
Last Day of the Year 31 December
Holiday Pay and Premium Pay
Holiday pay refers to the payment of the regular daily wage for any unworked
regular holiday.
Premium pay refers to the additional compensation for work performed within
eight (8) hours on non-work days, such as rest days and special days.
Every employee shall be paid a night shift differential
of not less than 10% of his regular wage for each hour
of work performed between 10pm and 6am.
Work may be performed beyond 8 hours a day
provided that the employee is paid for the overtime
work, an additional compensation equivalent to his
regular wage PLUS at least 25% thereof. Work
performed beyond eight hours on a holiday or rest day
shall be paid an additional compensation equivalent
to the rate of the first eight hours on a holiday or rest
day plus at least 30.
Night Shift Differential
It refers to the additional compensation of ten percent (10%) of an employee’s
regular wage for each hour of work performed between 10 p.m. and 6 a.m.

C. Computation of Night Shift Differential

The minimum night shift pay rates vary according to the day the night shift work is
performed.

Agriculture
 Overtime Pay
Overtime pay refers to the additional compensation for work
performed beyond eight (8) hours a day.
ACCOUNTING FOR OVERTIME PAY
DOLE
LABOR COST

CONTROL
What is labor
cost control?

refers to keeping track of labor costs in total and per

unit, comparing them with predetermined figures and
adopting prompt remedial measures in case there
are variances.
 Labor cost control requires:
Labor Production planning.
cost Use of labor standards and budgets
Labor performance reports
control Appropriate compensation including
wage incentive systems
 Labor cost control
Phases in accounting for labor:
Timekeeping - Determination of the total number of
hours worked by an employee.
Financial accounting - Preparation of payroll.

Cost accounting - Allocation of payroll charges to

different departments, jobs or overhead.
Forms used in controlling
labor cost
Clock card or Time card - it reflects the official hours of arrival and
departure of each worker. (Shows only the time)
Time ticket or Job ticket - reflects the specific type of work and the
job worked by each worker together with the time he started and
stopped.
Daily times reports - shows how a worker spends the total number of
hours timed-in for a day.
Payroll sheet - reflects how workers net pay are calculated.
Phases in accounting for labor with their appropriate
forms/medium:
Timekeeping Phase

Procedure Form
Compilation of the total Clock card or Time card
number of hours worked by
each employee.
Determination of how labor Time ticket or Job ticket
hours were spent.
 Financial accounting phase

Procedure Form

Payroll preparation and the

keeping track of

Payroll sheet
employee's wages,
deductions and payment of
salaries.
 Cost accounting phase

Procedure Form

Allocation of payroll
charges to the different
jobs, departments or to Daily time report
overhead based on the
nature of work done by the
employees.
Payroll
Gross earnings
of employees
Wages
Wages are payments made on an hourly, daily, or
piecework basis
Salaries
Salaries are fixed payments made regularly for
managerial or clerical services.

Gross Earnings
Gross earnings are the amount of compensation
of an employee that includes regular pay and
overtime premiums
Payroll Deductions
Social Security System (SSS) - is a government-mandated program for employees working for private
institutions in the Philippines.

Philippine Health Insurance Commission (PHILHEALTH) - to ensure affordable health insurance

coverage for working Filipinos, the government requires that all employees be insured through the
Philippine Health Insurance System, commonly known as PhilHealth.

Home Development Mutual Funds (PAG-IBIG) - is a state-owned corporation that primarily offers
savings and housing loan programs to its members.

Withholding Taxes on Compensation (to BIR) - is a reasonable estimate of employees’ income tax
liability and this is deducted from employees’ income arising from the employer-employee relationship.
CHARGING OF LABOR COST TO PRODUCTION

Gross Profit
Employees’
contribution
Net Pay
CHARGING OF LABOR COST TO PRODUCTION
Direct Labor
Indirect Labor
SSS CONTRIBUTION TABLE 2023
SSS CONTRIBUTION TABLE 2023
SSS CONTRIBUTION TABLE 2023
PHILHEALTH CONTRIBUTION TABLE 2023
 PAG-IBIG CONTRIBUTION TABLE

The maximum monthly compensation to be used in computing the

employee and employer contributions shall not be more than P5,000
https://www.bir.gov.ph/index.php/tax-information/withholding-tax.html#wt10
 Problem Solving
What is the employers and employees SSS contribution if the
01
employee earns P25,550 per month?

Solutions:

Employer SSS Contribution : P2,452.50

Employee SSS Contribution: P1,147.50
 What is the employers and employees PhilHealth contribution if
02
the employee had a gross pay P35,500?
Solutions:

4%/2 = 2%
ER: 35,500 x 2% = 710.00
EE: 35,500 x 2% = 710.00
 What is the employers and employees PAG-IBIG contribution if
03
the employee receives P25,550 per month?

Solutions:

EE: 5,000 x 3% = 150

ER: 5,000 x 3% = 150

*The maximum compensation considered in computing a member's

monthly PAG-IBIG contribution is P5,000, which equates to P150
contribution each for the employee and the employer. Since the pay
exceeds the limit, we'll have to use P150 contributions for both
employee and employer.
 An employee receiving semi-monthly compensation in the amount of
04 P13,700, net of mandatory contribution. What is the employee's withholding
tax?
Solutions:

Total taxable compensation: 13,700

Less: Compensation Range (Minimum) (10,417)
Excess = 3,283
Withholding tax shall be computed as follows
Tax on P10,417 0
Tax on the excess (P3,283 x 15%) 492.45
Total semimonthly withholding tax = 492.45
Comprehensive Problem
The following information is given based on the contents of clock
cards and time tickets for the month of June:

Kenneth is the production manager and the others are production

workers. Overtime work is rendered during ordinary working holidays.

Required: Prepare the payroll sheet