Labour Remuneration

BROUGHT TO YOU BY: HUZAIFA ABDULLAH TEL: 01674303688 ADDRESS: HOUSE#45, ROAD #1 DHANMONDI, DHAKA

EMAIL: [email protected]

1. Alex produces tables. He has hired to employees. In recent times he had to hire different workers as workers were leaving as soon as they had gained expertise in their jobs. In other words Alex was training workers for his competitors. He is concerned by this high labour turn over and wants to resolve this situation. He is considering two methods piece rate system and Hourly pay system. The following information is available: Employees Akkas 360

Units produced

Jabbar 420

Time allowed for each table

10

10

Time taken hours

28

54

Rate/hour (£)

9

9

Rate/unit

4

4

a. Using the information from above calculate the remuneration for each employees on Piece rate and on an hourly rate. Which remuneration scheme should Alex use: i. In point of view of the workers ii. In point of view of the Business. (2) b. A friend of Alex suggested introducing bonus scheme. He decided to pay the employees 50% of their time saved. Evaluate all the three proposals i.e. merits and demerits and help Alex decide on which method should he use. (6)

2. Xyz manufacturing limited has a premium bonus scheme based on time saved. Employees receive a bonus equivalent to half the time saved on a job. Three workers are given a similar job to do. Hourly rate is fixed to £15.The standard time is 6 hours. Worker A completes it in 3 hours, while Worker B takes 4 and Worker C takes the whole 6 hours to complete. a. Calculate the labour cost Xyz manufacturing limited. b. Evaluate the remuneration method. c. Assuming that Worker A and Worker C would be working at the same speed throughout a 35 hour week. Who would earn most? And why?

BROUGHT TO YOU BY: HUZAIFA ABDULLAH. ADDRESS: HOUSE#45, ROAD #1, DHANMONDI DHAKA. TEL: 01674303688, EMAIL: [email protected]

3. Three employees are given the same type of job to perform; the standard time is 7 hours. Under the company’s payment scheme employees are paid an hourly rate of £35 and a bonus on 40% time saved. Mariam performs the job in 4 hours, while Saimon takes 6 while Khaled takes 7. a. Calculate the wages earned by each worker showing clearly the bonus and the basic pay. b. Mariam is unhappy: she has worked the quickest and yet the scheme is penalising her. Explain with valid reasons wether she is justified in being angry? (5) c. What safeguards must a company build into its bonus scheme to ensure that they are not abused? (4)

4. A team of 8 workers produces a total of 400 items in an 8 hour day, for which each member is paid £5 per hour. The business is attempting to improve its labour productivity over the 8 hour day and has received the following proposals: i. Reduce the team to 6 members, changing working practises, resulting in a total output of 320 items per day. ii. Increase the team to 10 members resulting in a total output of 450 items per day. iii. Maintain the team at 8 members, but pay a bonus of £0.20 per item to be shared equally by the team, resulting in an output of 420 items per day. a. Required: i. Calculate the original unit if labour cost per item. ii. For each of the three proposals above, calculate the unit labour cost per item and state what effect each proposal would have on productivity. iii. The business produces and sells 2000 items in each of the 48 weeks that it operates. Calculate the annual cost saving that the business will achieve by implementing the most productive proposal. b. Labour productivity can be improved if the total output is increasing. i. Define labour productivity. ii. Describe two ways in which labour productivity might be improved without an increase in total output. iii. Evaluate the importance of bonus schemes in improving productivity in a business where quality of the product is essential.

BROUGHT TO YOU BY: HUZAIFA ABDULLAH. ADDRESS: HOUSE#45, ROAD #1, DHANMONDI DHAKA. TEL: 01674303688, EMAIL: [email protected]

5. A team of 8 staff members produces a total of 160 items of output per 8 hour day, for which each member is paid £5 per hour. The company is attempting to improve its labour productivity and has received the following four proposals: Option-1 The team is reduced to 6 members, with changes in working practises resulting in total output of 100 items per day. Option -2 The team is increased to 10 members resulting in a total output of 220 items per day. Option- 3 The team remains at 8 members, a differential piecework rate system would operate paying £2.50 per item to the first 100 items produced per day, and £2.00 per item thereafter. This would result in a total output of 200 per day. Option-4 A bonus is paid of 10 pence per item to be shared equally among the 8 staff members of the team, resulting in total output rising 200 items per day. Requirerd: a. Distinguish between the terms value of money and productivity. (8) b. Calculate: i. The original labour cost per item. ii. For each of the four options, calculate the unit labour cost per item and state the effect on the productivity. iii. What problems might arise when changing a labour remuneration system?

6. A company is considering paying the workers of research and development on the piece rate system. To what extent do you agree or disagree with this proposal. What payment scheme would you suggest? (8)

7. i. It is some times said of premium bonus schemes that it is the savings in the overheads which provides the funds out of which the bonus is paid. How can this be so? (5) iii.

What incentives do employers have on premium bonus schemes? (4)

BROUGHT TO YOU BY: HUZAIFA ABDULLAH. ADDRESS: HOUSE#45, ROAD #1, DHANMONDI DHAKA. TEL: 01674303688, EMAIL: [email protected]