04/24/2024

LABOUR COSTING

Introduction
• Labour cost is one of the important elements of
production. Wage, salaries and other incentives of
employee remuneration constitute a very large
component of operating costs.
• Remuneration of employees is a vital factor not
only affecting the cost of production but also
industrial relation relations of the organisation.

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Introduction
• No organization can expect to attract and attain qualified and
motivated employees unless it pays them fair remuneration.
• Employee remuneration therefore influences vitally the growth
and profitability of the company.
• For employees, remuneration is more than a means of satisfying
their physical needs. Wages and salaries have significant
influence on distribution of income, consumption, savings,
employment and prices.
• Thus. employee remuneration is a very significant issue from the
viewpoint of employers, employees and the nation as whole.

Objectives of an Ideal Wage

System
An ideal wage system is required to achieve the following
objectives:
• The wage system should establish a fair and equitable
remuneration.
• A sound wage system helps to attract qualified and efficient
worker by ensuring an adequate payment.
• It assists to improve the motivation and moral of employees
which in turn lead to higher productivity.
• It enables effective control of labour cost.
• An Ideal wage system helps to improve union-management
relations. It should reduce grievances arising out of wage
inequities.
• It should facilitate job sequences and lines of promotion
wherever applicable.
• An ideal system seeks to project the image of a progressive
employer and to comply with legal requirements relating to
wages and salaries.

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Principles of an Ideal Wage

System
The following principles should be adopted for an ideal wage
system:
• Differences in pay should be based on differences in job
requirements.
• Follow the principle of equal pay for equal work.
• The scheme should be based on work study, and the work
contents of various jobs should be stabilized.
• Recognize individual differences in ability and contributions.
• The scheme should not be very costly in operation.
• The scheme should be flexible.
• The scheme should encourage productivity.
• The scheme should not undermine co-operation amongst the
workers.
• 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 irrespective 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.

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Method of Remuneration
• The following are the important methods of
remuneration which may be grouped into :
– Time Rate Systems
– Piece Rate Systems
– Bonus System (or) Incentives Schemes.
– Indirect Monetary Incentives.
• These may be further classified as under:

Method of Remuneration
• Time Rate Systems:
– At Ordinary Levels
– At High Wage Levels
– Guaranteed Time Rates.
• Piece Rate Systems:
– Straight Piece Rate
– Piece Rates with Guaranteed Time Rate
– Differential Piece Rates:
• Taylor's Differential Piece Rate System
• Merrick Differential Piece Rate System
• Gantt Task and Bonus Plan.

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• Bonus System or Incentive Schemes:

– Halsey Premium Plan
– Halsey-Weir Premium Plan
– Rowan Plan
– Barth Variable Sharing Plan
– Emerson Efficiency Plan
– Bedaux Point Premium System
– Accelerating Premium Plan
– Group or Collective Bonus Plans.
• Indirect Monetary Incentives:
• Non-Monetary Incentives:

Comparison between Time Rate and

Piece Rate System

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Time Wage System

• Time Rate at Ordinary Levels: This is also
termed as "Day Wage System" or "Flat Rate
System." Under this system, wages are paid to
the workers on the basis of time spent on the
job irrespective of the quantity of work
produced by the workers. Payment can be made
at a rate per day or a week, a fortnight or a
month. The formula for calculation of payment
of time rate of ordinary levels is as follows:
• Remuneration or Earnings = Hours Worked X
Rate Per Hour

Time wage system is suitable under the following

conditions:
• Where the units of output are difficult to
measure, e.g., watchman.
• Where the quality of work is more important,
e.g., artistic furniture, fine jewellery, carving etc.
• Where machinery and materials used are very
sophisticated and expensive.
• Where supervision is effective and close
supervision is possible.
• Where the workers are new and learning the job.
• Where the work is of a highly varied nature and
standard of performance cannot be established.

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Advantages of Time wage

system
• It is simple and easy to calculate.
• Earning of workers are regular and fixed.
• Time rate system is accepted by trade unions.
• Quality of the work is not affected.
• This method also avoids inefficient handling of
materials and tools.

Disadvantages
• No distinction between efficient and
inefficient worker is made and hence they get
the same remuneration.
• Cost of supervision are high due to strict
supervision used for high productivity of labour.
• Labour cost is difficult to control due to more
payment may be made for the lesser amount of
work.
• No incentive is given to efficient workers. It
will depress the efficient workers.
• There is no specific standards for evaluating
the merit of different employees for
promotions.

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• Time Rate at High Levels: Under this system,

efficient workers are paid higher wages in order
to increase production. The main object of this
method designed to remove the drawbacks of
time rate at ordinary levels. This system is
simple and easily understandable. When higher
rate of wages are paid, it does not only reduce
labour turnover but also increases production and
efficiency.
• Guaranteed Time Rates: Under this method, the
wage rate is calculated by considering changes in
cost of living index. Accordingly, the wage rate is
varied for each worker according to the change
in cost of living index. This system is suitable
during the period of raising prices.

Piece Rate System

• This is also known as "Piece Wage System" or
"Payment By Result." Under this system, wages of
a worker are calculated on the basis of amount of
work done or output of a worker. Accordingly, a
worker is paid in direct proportion to his output.

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Advantages
• It facilitates direct relation between efforts and reward.
• This system encourages the efficient workers to increase
production.
• Under this system efficient workers are recognized and
rewarded.
• It helps to reduce the cost of supervision and idle time.
• Tenders or quotations can be prepared confidently and
accurately.

Disadvantages
• Where a concern is producing large
quantities, it is difficult to fix a piece
rate.
• In order to maximize their earnings,
workers working with high speed may
affect their health.
• The quality of output cannot be
maintained.
• This system is not encouraging to the
inefficient workers.
• Temporary delays or difficulties may
affect the earnings of the workers.

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Piece Rate System is Suitable

Where
• Quality and workmanship are not important.
• Work can be measured accurately.
• Quantity of output directly depends upon the
efforts of the worker.
• Production of standardized goods in a factory.
• Job is of a repetitive nature.

Piece Rate Payment Methods

• There are three important methods of paying
labour remuneration falling under this type
• Straight Piece Rate
• Piece Rates with Guaranteed Time Rates and
• Differential Piece Rates.

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Straight Piece Rate

• Under this system, workers are paid according to the
number of units produced at a given rate per unit.
Thus, total earnings of each worker is calculated on
the basis of his output irrespective of the time taken
by him. The following formula is used for measuring
piece work earning:
Straight Piece Work Earnings = Units Produced x
Rate Per Unit

Piece Rates with Guaranteed

Time Rates:
• Under this method, the worker earning from piece
work less than the guaranteed minimum wage, will
get the fixed amount of guaranteed time rate. A
guaranteed rate would be paid per hour rate or day
rate or week rate.

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Differential Piece Rates:

• This system is designed to provide for variation of piece
rates at different levels of output. Accordingly increase in
wages is proportionate to increase in output. Under this
system, efficient workers get ample reward and at the same
time inefficient workers are motivated to earn more. The
following are the three important types of differential
piece rates :
– Taylor's Differential Piece Rates System.
– Merrick's Differential Piece Rates System.
– Gantt Task Bonus Plan.

Taylor's Differential Piece

Rates System
• F.W. Taylor, who is the father of scientific
management introduced this plan. Under this system,
two piece rates are applicable on the basis of
standard of performance established. Accordingly one
is high rate and the other one is lower rate.
• Thus high piece rate is applicable for standard and
above the standard performance. Lower piece rate for
those workers with below the standard performance.

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Illustration: 1
• Calculate the earnings of workers A and B under Straight Piece
Rate System and Taylor's Differential Piece Rate System from
the following particulars:
• Standard time allowed 50 units per hour.
• Normal time rate per hour TZS 10,000.
• Differentials to be applied.
– 80% of Piece rate below standard.
– 120% of Piece rate at or above standard.
• In a day of 8 hours A produced 300 units and B produced 450
units.

Merrick Differential Piece Rate

System
• This is also termed as Multiple Piece Rate system.
This plan is 'designed to overcome the drawback
of Taylor's Differential Piece Rate System. Under
this method, three piece rates are applied with
different levels of performance.
• Accordingly

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Merrick’s Applicable Differential

piece Rates

Illustration: 2
• From the following particulars calculate
the total earning of the three workers
under Merrick Differential Piece Rate
System.
• Normal rate per hour TZS. 5 per unit
• Standard production per hour 10 units
• In an 8 hours a day:
– A produced 70 units.
– B produced 90 units.
– C produced 65 units.
– D produced 110 units

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Gantt's Task Bonus Plan

• This system is designed by Henry L. Gantt.
• Under this system, standard time for
every task is fixed through time and
motion study.
• The main feature of this system is a good
combination of time rate, differential
piece rate and bonus.
• In this system day wages are guaranteed
to all workers. Wages under this system
are calculated as follows :

GANTT’S TASK BONUS PLAN

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Illustration: 3
From the following particulars, calculate total earnings
of each worker under Gantt's Task Bonus Scheme:
• Standard production per week per worker is 2000
units, piece work rates. 500 per unit
• Actual production during the month :
• A-10OO units
• B - 2000 units
• C - 2500 units

Bonus or Incentives Schemes

• Incentive schemes of wage payment are also known as
Premium Bonus Plans. introduced in order to increase
production with ensuring proper industrial climate. Wage
incentive plans may be of two types :
– Individual Incentive Plans and
– Group Incentive Plans.
• Under individual incentive plans, remuneration can be
measured on the performance of the individual worker.
• In the case of the group incentive scheme earnings can be
measured on the basis of the productivity of the group of
workers or entire work force of the organization.
• Various types of incentive schemes are combinations of
time and piece rate systems.
• The following are the important individual incentive plans
discussed below:

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Halsey Premium Plan

• This Plan was developed by F. A. Halsey. This system also
termed as Split Bonus Plan or Fifty-Fifty Plan. Under this
plan, standard time is fixed for each job or operation on the
basis of past performance. If a worker completes his job
within or more than the standard time then the worker is
paid a guaranteed time wage. If a worker completes his job
within or less than the standard time, then he gets a bonus
of 50% of the time saved plus normal earnings. Under this
method, the total earnings is calculated as follows:

Illustration: 4
• Calculate the total earnings of the worker under
Halsey Premium Plans:
– Standard Time 12 hours
– Hourly Rate TZS. 3
– Time Taken 8 hours

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Merits & Demerits of Halsey Premium Plan

Merits
• It is simple to understand.
• Total earnings of each worker can be easy to calculate.
• Both employer and employee get equal benefit of time
saved.
• This system not only benefits efficient worker but also
provides average worker to get guaranteed minimum
wages.
• This system is based on time saved and it can reduce the
labour cost.
Demerits
• Lack of co-operation among the employees.
• Under this system establishment of standard is very
difficult.
• Earnings are reduced at high level of efficiency.

The Halsey-Weir Scheme:

• Under this system, the worker gets the bonus of 30%
of the time saved instead of 50% of time saved under
Halsey Plan. Except for this, Halsey Plan and Halsey-
Weir Systems are similar in all other respects.
Illustration: 5
• From the following particulars calculate total earnings
of a worker under Halsey-Weir Plan :
– Standard Time = 10 Hours
– Time Taken = 8 Hours
– Hourly Rate = TZS. 20,000 per hour

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Rowan Plan:
• This plan was introduced by James Rowan of England.
It was similar to the Halsey Plan in many respects
except that it differs in calculation of bonus. Under
this system, bonus is determined as the proportion of
the time taken which the time saved bears to the
standard time allowed.
• Under this system the following formula is applied to
calculation of bonus:

Rowan Individual Bonus scheme

Formula

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Illustration 6
• From the following information, calculate total
earnings of a worker under Rowan System :
– Standard Time = 10 hours

– Time Taken = 8 hours

– Rate per hour = TZS.30,000

Exercise
• The finishing shop of a company employs 60 direct workers.
Each worker is paid TZS 4000 as wages per week of 40
hours. When necessary, overtime is worked upto a maximum
of 15 hours per week per worker at time rate plus one-half as
premium. The current output on an average is 6 units per man
hour which may be regarded a standard output. If bonus
scheme is introduced, it is expected that the output will
increase to 8 units per man hour. The workers will, if
necessary, continue to work overtime up to the specified limit
although no premium on incentives will be paid.
• The company is considering introduction of either Halsey
Scheme or Rowan Scheme of wage incentive system. The
budgeted weekly output is 19200 units. The selling price is
TZS. 1100 per unit and the direct material cost is TZS. 8,000
per unit. The variable overheads amount to TZS. 500 per
direct labour hour and the fixed overhead is TZS. 900,000
per week.
• Prepare a statement to show the effect on the company's
weekly profit of the proposal to introduce (a) Halsey Scheme,
and (b) Rowan Scheme.

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Emerson's Efficiency Sharing

Plan
• Under this plan, earning of a worker is by
combining guaranteed day wages with a
differential piece rate.
• Accordingly the level of efficiency is
determined on the basis of establishment of
standard task for a unit of time.
• If the level of worker's efficiency reaches
67% the bonus is paid to him at a normal rate.
The rate of bonus increases in a given rate as
the output increases from 67% to 100%
efficiency. Above 100% efficiency, the bonus
increases to 20% of the wage earned plus
additional bonus of 1 % is added for each
increase of 1 % in efficiency.

Illustration 7
• From the following particulars calculate total
earnings of a worker under Emerson's Efficiency
Sharing Plan :
– Standard output per day of 8 hours is 16 units
– Actual output of a worker for 8 hours is 20 units
– Rate per hour is TZS. 25,0000
Solution ??

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Barth Variable Sharing Plan

• This scheme introduced to attract
newly recruited and skilled employees
who are motivated to learn work. It
provides sufficient incentives to
inefficient workers who are motivated
to increase productivity.
• Earning under this method is calculated
by applying the following formula:

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Bedaux Point Premium System:

• This plan was introduced by Charles E.Bedaux in 1911. Under this plan,
standard time fixed for each operation or job is expressed in terms of
Bedaux point or'S.' For example, a standard time of 360 B means the
operation or job should be completed within 360 minutes.
• The main advantage of this plan is that it can be applied to any kind of a
job.
• Under this system, a worker is paid at the time for actual hours worked,
and 75% of the wages for the time saved are paid as bonus to the worker
and 25% to the foremen, supervisors etc.
• The following is the formula for calculation of total wages of a worker:
Total earnings = S x R + 75% of R (S - T)

Illustration: 8
• From the following particulars, calculate total earnings
of a worker under Bedaux Point Premium System:
– Standard Time = 360 B

– Time Taken = 240 B

– Rate per hour =TZS. 10,000

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Accelerating Premium Bonus

Plan:
• Under this plan, bonus is determined on the basis
of time saved unlike a fixed percentage under
Halsey Plan and as a decreasing percentage under
Rowan Plan. The bonus is paid to workers at an
increased rate according to more and more time
saved. This provides increasing incentives to
efficient workers.

Group or Collective Bonus Plan

• The incentive schemes explained so far are
applicable to individual performance depending
directly on production. However. it is not the
individual worker who produce the goods or
services (operation) alone but group of several
other workers are required to jointly perform a
single operation. It is, therefore, essential that a
group incentive scheme be introduced. Bonus is
calculated for a group incentive scheme.
• The bonus is calculated for a group of workers and
the total amount is distributed among the group of
workers on anyone of the following basis :
– Equally by all the workers of the group.
– Pro rata on the time rate basis.
– Pre determined percentage basis.
– Specified proportion basis.

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Types of Group Incentive Plans

• Budgeted Expenses Bonus Plan: Under this method, bonus
is determined on the basis of savings in actual expenditure
compared with total budgeted expenditure.
• Priest Man Bonus Plan: Under this plan, standard
performance is fixed by the management and committee of
workers. The group of workers get bonus when actual
performance exceeds the standard performance
irrespective of individual's efficiency or inefficiency.

• Towne's Gain-sharing Plan: Under this plan,

bonus is calculated on the basis of savings in
labour cost. The group of workers get bonus
when actual costs is less than the standard
costs, one-half of the savings is distributed
among workers including foremen in proportion
with the wages earned.
• Scanlon Plan: Scanlon Plan is designed with the
chief aim of reducing the cost of operations in
order to increase the production efficiency.
This plan is generally applicable in industries
where the operation cost is high. Under this
scheme, bonus is determined on the basis of
standard costs or wastages and percentage of
the reduction in operation cost.

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Indirect Monetary Incentives

• Incentive schemes are regarded beneficial to both
employers and workers. In this regard, under
indirect monetary incentives by giving them a
share of profit and introducing co-partnership
schemes or as they have become partners in the
business in order to make a very profitable
enterprise.

Non-Monetary Incentive
Schemes:
• Under this system, employees are provided better
facilities, instead of additional monetary payments.
Some of the examples of non-monetary incentives
are free education for children, rent free
accommodation, medical facilities, canteen
facilities, welfare facilities, and entertainment
facilities etc.

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MEASUREMENT OF LABOUR
EFFICIENCY AND PRODUCTIVITY
• In order to introduce a good remuneration system, it
is necessary to know the contents of the job or
operation that an employee is expected to perform. A
detailed analysis of each job and operation will reveal
its characteristics and scope for improvement, and
lead to establish methods for measurement of
efforts involved and productivity to be achieved.
• In big organisations, industrial engineer or time study
engineer undertakes various work studies, while
personnel department prepares job evaluation and
merit rating for this purpose.

Work Study
• Work study consists of method time
and motion study in relation to the
performance of a job or operation.
• Time study involves the technique of
establishing an allowed time standard to
perform a given task, based upon
measurement of the work content of
the prescribed method, with due
allowance for fatigue and for personal
and avoidable delay

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• Time study is concerned with the determination of

standard time required by a worker of average
ability, under normal condition to perform a task.
• Motion study technique, developed by F.B.Gilbraith,
is defined by Benjamin W. Niebel as “the study of
the body motion used in performing an operation,
with the thought of improving the operation by
eliminating unnecessary motion and simplifying
necessary motions and then establishing the most
favourable motion sequence for maximum
efficiency”.
• Time and motion study is incomplete without method
study, which is concerned with determining the
proper method of performing a job. All the three i.e.
time, motion and method study are parts of the total
work study which helps management in effective use
of human efforts.

The steps in time and motion

study are the following:
• Identify the work.
• Observe the workers performing the job.
• Record all the relevant parts of performing job by present
method.
• Note down wasteful movements and restructure proposed
method giving due allowance for fatigue, interference, etc.
• Critically examine the proposed method, and develop the
most practical, acceptable and effective method.
• Install that method as standard practice.

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The time and motion study serves

the following purposes:
• Standardising jobs, operations, etc. by providing the
best method of operating within the time allowed.
• Standardisation of equipments, methods, materials
and working conditions.
• Fixation of wage-rates including piece rates and
incentive schemes.
• Assessing manpower requirements correctly.
• Cost control through proper planning.

Job Evaluation
• Job evaluation is a process of analysis and
assessment of each job determining its worth
in relation to all other jobs within an
organisation in order to provide a basis for
wages and salary structure. It helps
determination of correct grade of labour for
each job or operation, and establishes the
rationale for differentials in wages and salaries
between different groups of employees.
• The objectives of job evaluation is to evolve a
systematic job, wages and salary structure
according to characteristic features of each
job.

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Reading Assignment
• Methods of job evaluation can be classified into
four groups as given below:
– Ranking method
– Grading method
– Point rating method
– Factor comparison method.

IDLE TIME AND OVERTIME

• Idle time refers to that portion of hours paid
which are not utilised for productive purposes.
• This is reflected in the time card as the hours
not booked in job or work order, and during
which time the worker remains idle.
• Idle time can be classified under normal and
abnormal idle time. Normal idle time
represents inevitable loss of labour hours
arising out of the following situations:
– Time lost between factory gate and place of work,
tea break, lunch break, etc.
– Time lost in setting the machine, tools, change-
over from one job to another, fatigue, etc.
– Time lost in power-failure, machine breakdown,
waiting for material, etc.

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Idle time
• Out of the above causes, some are inherent in
the process and controllable to a great extent.
• While time lost due to external causes such as
general power-failure are uncontrollable in the
hands of the management. Thus, it is possible
to identify normal idle time, and any loss of
time beyond the normal allowed hours shall be
called abnormal idle time, such as:
– Excessive machine-breakdown.
– Excessive internal power failure.
– Excessive waiting time for material, instructions,
etc.
– Too much time to rectify defectives.
– Strike, lockout, fire, floods, etc.

Idle time can be controlled by

adopting the following measures :–
• Preparation and analysis of labour utilisation
report with breakdown of idle time.
• Minimising machine breakdown by adopting
preventive maintenance.
• Proper material and production planning, and
follow-up system.
• Timely purchase of materials and components.

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Accounting of Idle Time

• Normal idle time of all workers should be collected
under standing order number and charged to factory
overheads. However, some of the normal idle time of
direct workers, which are associated with the job or
work order, such as, time taken for machine setting,
change-over or tool setting, can be added to the
product cost as direct wages by inflating the hourly
rate of wages.
• Abnormal idle time cost shall be collected as per
standing order numbers or accounts code numbers
and shall be charged to costing profit and loss
account. Under no circumstances, abnormal idle time
can be charged to product-cost.

Overtime
• The control of overtime is very important, because of its
tendency to increase and to become a normal practice for
earning extra money. It has harmful effect on the health and
morale of the workers, besides unfavourable effect on
productivity. It may also lead to high absenteeism.
• The overtime hours should, therefore, be controlled
rigorously. Except for unavoidable reasons, overtime work
should not be allowed. Sanctioned overtime work should be
supervised properly to ensure full utilisation of time. Daily or
weekly overtime report should be reviewed by higher
management.
• Overtime is normally paid at a rate higher than normal wages.
Usually, it is one and half or double the normal wage-rate.
• The extra amount over the normal wage-rate is called
overtime premium. Normal wages form part of direct labour
cost. The charging of overtime premium needs consideration
of the circumstances under which overtime was undertaken,
and accordingly, the standing order number will be debited.

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Accounting of Overtime Premium

• If overtime is paid to complete a job at the request of the
customer, overtime premium is charged to the job order
concerned.
• If overtime is undertaken in order to cope up with
increased production, overtime premium is treated as
factory overheads. Alternative method is to distribute the
overhead premium over all the jobs undertaken during
normal as well as overtime hours at an average rate
• If overtime is paid for any capital order, such as,
fabrication of a machine to be used internally, the
overtime premium shall be charged to capital work order
account.
• If overtime is worked to recover production loss due to
abnormal conditions such as, strike, lock out, flood, etc.,
the premium should be charged to costing profit and loss
account.

Overtime work should be

controlled in the following ways —
• No overtime work shall be allowed without prior
authorisation.
• If overtime is unavoidable, then it should be
planned in advance, and actual overtime hours
should be compared against plan.
• Overtime hours with normal working hours
should be reported daily. A monthly overtime
report showing overtime hours, and cost
compared to the previous month as well as plan
should be submitted to higher authority.
• Cost of overtime work vis-a-vis recruitment of
additional worker should be reviewed
periodically

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Payroll Accounting

“Payroll” pertains to both:

Salaries - managerial, administrative, and sales

personnel (monthly or yearly rate).

Wages - store clerks, factory employees, and manual

laborers (rate per hour).

Determining the Payroll

Involves computing three amounts: (1) gross earnings,
(2) payroll deductions, and (3) net pay.

Determining the Payroll

Gross Earnings

Total compensation earned by an employee (wages or

salaries, plus any bonuses and commissions).

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Determining the Payroll

Payroll Deductions

Mandatory: Voluntary:
◆ PAYE ◆ Charity
◆ SDL ◆ Insurance
◆ NHIF ◆ Trade Union
◆ Social Security ◆ Loan Deductions
Contribution
(PSSF,NSSF,etc)

Determining the Payroll

Net Pay
Gross earnings minus payroll deductions.

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Recording the Payroll

Maintaining Payroll Department Records

Many companies find it useful to prepare a payroll register.

PAYROLL CALCULATION FOR THE MONTH OF………………

EARNINGS DEDUCTIONS

Social Health Total

EMPLOYEE'S BASIC ALLOWAN OVERTI GROSS Income Securit Trade Union Insuran Deduct NET
S/N NAME SALARY CES ME PAY Tax y Fund Contribution ce ions PAY

Recording the Payroll

Recognizing Payroll Expenses and Liabilities

Illustration: Prepare the entry Academy Company would make to
record the payroll for the week ending January 14.

Salaries and Wages Expense 17,210.00

PAYE 1,316.67
NSSF/PSSF 3,490.00
Loan Board 344.20
SDL 421.50
Trade Unions 115.00
Salaries and Wages Payable 11,522.73

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Recording the Payroll

Recording Payment of the Payroll

Illustration: Prepare the entry Academy Company would make to
record the payment of the payroll.

Salaries and Wages Payable 11,522.73

Cash 11,522.73

LO 6 Compute and record the payroll for a pay period.

Internal Control for Payroll

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Tanzania’s applicable PAYE for the

year 2023/2024
Income Range Tax rate (PAYE)
(monthly)
Tshs %
0 – 270,000=00 NIL
270,001– 520,000=00 8% of the amount in excess of Tshs.
270,000=00

520,001– 760,000=00 Tshs. 20,000=00 plus 20% of the

amount in excess of Tshs. 520,000

760,001 – 1,000,000 Tshs. 68,00 plus 25% of the amount

in excess of Tshs. 760,000

1,000,000 and above Tshs. 128,000 plus 30% of the

amount in excess of Tshs. 1,000,000

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