BBA Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes

Activity Sampling

In active sampling, a number of successive observations are made over a period of time of one or a group of machines, processes or workers. Each observation records what is happening at that instant and the percentage of observation recorded for a particular activity or delay is a measure of the percentage of time during which that activity or delay occurs. Activity sampling is a technique in which a large number of instantaneous observations are made over a period of time, of a group of machines, processes or workers.

Work simplification

Work simplification is a technique for analyzing operations and procedures with a view to finding easier ways of performing the work involved.

The labour remuneration methods, plans and systems are broadly classified into three categories as given below:

  • Time rate methods
  • Piece rate methods, and
  • Group bonus plans

Each of the above categories is discussed in detail in the next paragraphs.

Bba Study Material Cost Accounting to Direct Labour Remuneration Methods, Topic Is Time Rate Remuneration Methods

Time Rate Remuneration Methods

In time based wage payment system standard time is predetermined and the efficiency of each individual worker is assessed to compensate them for higher efficiency in work as compared to standard time set.

Suitable of time Rate system

This method can be suitable applied applied in the following circumstances:

  • Where the output of an individual worker cannot be measured reasonably.
  • Where the work is required to be closely supervised.
  • Where the quality of work is more important.
  • Where output of an individual worker is not in his control.
  • Where increase in output is negligible compares to the incentive.


  • It is commonly recognised by all trade unions as well as workers.
  • It is a guaranteed income assured to the workers.
  • It is very easy to understand and simple to calculate the earnings of workers.
  • It involves less clerical work and detailed records are not necessary.
  • Since the production is not the criteria for calculation of wages, tools and materials are handled carefully. Wastage is also minimised.


  • Labour cost may rise due to decrease in productivity, thereby decreasing profit.
  • Production may decrease thus upsetting production schedules, create production bottlenecks and increase cost of production per unit.
  • It may lead to create idle time.
  • The payment is not linked to production, this system encourages inefficiency.
  • It does not encourage initiative.
  • Standards for labour are difficult to set.
  • It requires close supervision resulting in increase in supervision costs.
  • Labour cost cannot be accurately estimated for the purpose of cost estimations and quotations.

Bba Cost Accounting Short Notes of Flat Time Rate Method

Flat Time Rate Method

Under this system the worker is paid on hourly, daily or weekly wage rate and his remuneration is based on the time spent for production and wages are calculated as follows:

For example, if the hourly rate is Rs. 12 and a worker has worked 42 hours in a week, his weekly wages are:

Bba Cost Accounting Flat Time Rate Method Calculated In an organisation where quality is given priority or if it is difficult to measure the production on time basis, this method is more appropriate. But this will not give consideration to hard, sincere and skilful work.

Bba Cost Accounting Short Notes of High Day Rate System

High Day Rate system

Under this method, employees are paid a high hourly wage rate than the rate paid at different organisation in the industry or region expecting that the workers will work more efficiently. To implement this method, the efficient, skilled and experienced workers are selected expecting an efficient and hard work from them in expectation of that the organisation will pay wages at higher rates than prevailing in the industry.

For example, the normal wage rate prevailing in the other similar companies is Rs. 12 per hour,  X Ltd. Has adopted high day rate of RS. 15 per hour. A worker who worked for 42 Hours in a week will be paid as under:

The supervision cost will reduce under this method and there will be reduction in overall labour cost per unit. The main drawback is that there is no guarantee that high day rate system will act as an incentive. The high wages may become the accepted level of pay for normal working and supervision may be may necessary to ensure increased productivity and units cost would rise. Another disadvantage is that the workers will get only fixed hourly rate for their effort and it will not act as an individual incentive for extracting efficient and more output from him. Sometimes, this wage plan is used as an incentive to achieve present targets and problem arises if the anticipated production targets are not achieved.

Bba Cost Accounting Short Notes of Different Time Rates 

Different Time Rates

Under this method, different time rates are fixed for different efficiencies and skills. Normal wages are paid upto the level of standard efficiency and increase in efficiency, will be paid at graduated scale of payment.

For example, wages are paid according to skills of the workers as given below:

This method of wage payment is also not popular due to its complication in computation of earnings.

Bba Cost Accounting Short Notes of Halsey Premium Bonus Plan

Halsey Premium Bonus Plan

Under this method, for each unit or job a standard time is calculated and 50% of the time saved is allowed as bonus. The time rate paid for the time taken plus 50% of the time saved. It the job is completed in less than the standard time, rate is guaranteed. The total wages of a worker is calculated as follows:

Bba Cost Accounting Short Notes of Rowan Premium Bonus Plan

Rowan Premium Bonus Plan

Under this method, a standard time is calculated for every job or process and a bonus is paid upon the time saved calculated as a proportion of the time taken which the time saved bears to the time allowed. In contrast of halsey plan, instead of a fixed percentage of time saved, bonus is in the proportion of time saved to time allowed. Under rowan plan m the total wages are calculated as follows:

Comparison of Halsey and Rowan plans

  • Where the worker completes his work with in half the time allowed; the bonus under both the plans will be same.
  • It time saved is less than 50% of time allowed, the Rowan plans is beneficial for the worker.
  • If time saved is more than 50% of the standard time, the Halsey plan is advantageous to the worker.

Bba Cost Accounting Short Notes of Halsey – Wair Plan

Halsey – Wair Plan

This is a modified system of Halsey premium bonus plan. This is also called as 331/3% – 662/3% sharing plan. According to this plan, 331/3% of the time saved will be paid to the worker as bonus and the remaining 662/3% is shared by the employer.

Bba Cost Accounting Short Notes of Accelerated Premium Bonus plan

Accelerated Premium Bonus plan

Under accelerated premium plan, the rate of bonus payable to the workers will increase along with increase in efficiency. The skilled workers are highly encouraged under this method. The illustration given below explains the application of this plan:

From the following particulars calculate the earnings of a worker. Rate per hour Re. 050. Standard time – 200 hours. Time taken – 140 hours. Method of bonus payment:

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