Labor Cost

Irene Ratri Andia Sasmita, STP., MP

 Component cost labor
Cost labor Definition Example
Salary compensation given to employees Employee salary
based on number of hours worked
Tips Extra compensation given by a Production tips, sales
company to an employee of the tips,
performance employees on
standards set 
Allowance Extra compensation given by a Holiday allowance,
company to an employee besides insurance allowance,
salary and tips Pension allowance
 Labor Productivity
Relationship between output produced by labor
and input to used
Output is goods and service produced
Input is goods and service needed/used
 Calculation Productivity
• Productivity ratio is comparison between
output produced by labor and standard set

Productivity ratio =

Percentage productivity=
 Example
• The company determines 0,5 hours as the
standard time to work on 1 product unit.
Actual production data shows that the total
production is 10 units with a working time of 6
hours. Calculate productivity ratio and
percentage productivity!
 Answer
•  Working hours standard
1.
10 unit x 0,5 hours = 5 hours
2. Actual productivity ratio
= 1,67
3. Standard productivity ratio
=2
4. Percentage productivity
x 100% = 83,5%
• Conclusion : Actual productivity ratio unprofitable because
it is less than the target
 Tips program
• To increase productivity of labor is giving extra
compensation to an employee through tips
program
• Tips program is a program that designed by a
company to give award more to an employee
who is able to reach achievement above
standard
 Tips program objective
1. Stimulate employees to produce more
products
2. To give greater compensation to employees
according to their achievements
3. Reduce production cost per unit
 Types tips program
1. Straight piecework plan
Paid the price for above the base rate for the production
of above standard
2. One-hundred-percent bonus plan
A plan that its standard not expressed in money, but in
time per unit of output
3. Group bonus plan
A plan that its standard not expressed in money, but
within per unit output. A plan that gives per hour for the
production of until according to the number of standard
output to any workers in the group.
 Straight piecework plan
Actual Standard Insurance Tips/unit Wages total/ Labor cost/
Production/ production/ wages/ hours unit
hours hours hours
1 2 3 4 5=3+4 6 = 5/1
10 unit 12 unit Rp 1.200 Rp 0 Rp 1.200 Rp 120
11 unit 12 unit Rp 1.200 Rp 0 Rp 1.200 Rp 109
12 unit 12 unit Rp 1.200 Rp 0 Rp 1.200 Rp 100
13 unit 12 unit Rp 1.200 Rp 100 Rp 1.300 Rp 100
14 unit 12 unit Rp 1.200 Rp 100 Rp 1.400 Rp 100
15 unit 12 unit Rp 1.200 Rp 100 Rp 1.500 Rp 100
 One-hundred-percent bonus plan
Employe Working Unit Standard Efficien Wages/ Wages x Wages Wages/
e hours output product cy hours ratio total unit
ratio
1 2 3 4= 2x12 5=3/4 6 7= 6x5 8 = 2x6 9= 8/3
unit
Andi 42 h 378 unit 504 unit 0,75 Rp 1.200 - Rp Rp 133
50.400
Budi 45 h 648 unit 540 unit 1,2 Rp 1.200 Rp 1.440 Rp Rp 100
64.800
Caca 45 h 597 unit 540 unit 1,1 Rp 1.200 Rp 1.320 Rp Rp 100
59.700
Deny 48 h 547 unit 576 unit 0,9 Rp 1.200 - Rp Rp 105
57.600
Fitri 44 h 660 unit 528 unit 1,25 Rp 1.200 Rp 1.500 Rp Rp 100
66.000
Elea 40 h 552 unit 480 unit 1,15 Rp 1.200 Rp 1.380 Rp Rp 100
55.200
Ghisna 40 h 480 unit 480 unit 1 Rp 1.200 - Rp Rp 100
48.000
 Group Bonus Plan
Unit Actual Working Group Bonus group Group Wages/
output working hours wages wages unit
hours total
1 2 = 1/12 3 4= 3x1.200 5 = (2-3)x 6 = 4+5 7= 6/1
unit 1.200
504 unit 42 h 48 hours Rp 57.600 - Rp 57.600 Rp 114
528 unit 44 h 48 hours Rp 57.600 - Rp 57.600 Rp 109
576 unit 48 h 48 hours Rp 57.600 - Rp 57.600 Rp 100
600 unit 50 h 48 hours Rp 57.600 Rp 2.400 Rp 60.000 Rp 100
624 unit 52 h 48 hours Rp 57.600 Rp 4.800 Rp 62.400 Rp 100
648 unit 54 h 48 hours Rp 57.600 Rp 7.200 Rp 64.800 Rp 100