Cost Accounting – Labor and Payroll Classification of Earners

Payroll Accounting – is the process of Fixed Monthly Earners – with fixed

computing and recording of monthly basic pay as basis in
disbursement for wages and salaries and computation of salary.
their related statutory deductions and Note: Use 365 as denominator/numerator for
other allowable deductions. computations of daily rate, monthly rate, etc.

Payroll Function Daily Wage Earners – employees with

daily rate as basis in computation of
 Primary Responsibility: to
wages.
compute the wages/salaries
earned by employees Note: 365 (Mon-Sun); 313 (Mon-Sat); 261 (Mon-Fri)

 Forms: payroll record; Note: Use 393.5 if worker works every day, even on
employees’ earnings records holidays

 Payroll Summary: sent to Types of Employees

accounting department for
recording Regular (R) – monthly salary
 Payroll Record: sent to treasurer Probationary (P) – monthly salary/daily
to make payments wage (6 mos. Probation Period)
Labor Cost Contractual (C) – daily wage/fixed
 Human contribution to production contract fee
 BASIC PAY + OTHER Seasonal (S) – daily wage
BENEFITS
Apprentice (A) – with or without pay
Direct Labor
Learners (L) – 75%
 Payroll costs that are directly
traceable to individual jobs Salary
worked on during the period  A fixed amount of compensation
 Debited to: WIP Account covering a fixed period of time,
Indirect Labor usually a month.
 Pay of managerial, administrative,
 Costs for jobs that are related to and rank and file employees.
the production process but not
readily traceable to the individual Wage
jobs  A fixed amount of compensation
 Charged to: Factory Overhead covering fixed period of time
(usually hours) or fixed amount of
work (per piece)
 Generally given to skilled and
unskilled labor.

Study well
Hourly Rate Plan – employee wages = Basic Pay
rate per hour x number of hours worked
 Regular pay for work on a regular
Piece Rate Plan – wages are based on day, on regular hours
quantity of production  Base rate or job rate
 Can be monthly or daily
 Units produced x rate
 Philippine max work time: 8 hours
 A.K.A. incentive wage plan or
piece-rate plan 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚ℎ𝑙𝑙𝑙𝑙 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑥𝑥 12 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚ℎ𝑠𝑠
𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 =
365 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
Modified Wage Plan – minimum hourly
wage is set even if an established quote Computation of daily rate for fixed
is not attained. monthly earners
 Bonus when quota is exceeded 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
 Make-up guarantee (quota is 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑥𝑥 𝐾𝐾 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
=
not met) is charged to overhead. 12
 In the case of teams, single Computation of EEMR where K is:
incentive for groups.
(1) 365 days (monthly paid
Minimum Wage
employees) (298 ordinary days;
 Basic pay + COLA (Cost of 52 Sundays and rest days; 12
Living Allowance) regular holidays; 3 special days)
 Regional Minimum Wage (2) 393.5 days for workers who work
on Sundays, special days, and
Exemption from Wage Orders regular holidays (298 ordinary
Distressed establishments days; 24 regular holidays; 67.6
rest days; 3.9 special days)
 Deficit of ≥20% or with capital (3) 313 days for workers who do not
deficiency work on Sundays or rest days (6-
New business enterprises day work week) (298 regular days;
12 regular holidays; 3 special
 Agriculture of ≤P5M total assets days)
Retail/service firms with ≤10 workers (4) 261 days for workers who do not
work on Saturdays, Sundays, or
Establishments affected by natural rest days (5-day work week) (246
calamities ordinary days; 12 regular
 Losses of ≥20% capital holidays; 3 special days)

Study well
Time of Payment Regular 200% 100%
holiday
 Shall be paid once every two
Regular 260% 160%
weeks or twice a month at
holiday and
intervals not exceeding 16 days
rest day
 In case of unforeseen
circumstances, payment shall be
made after circumstances have Who are given holiday pay?
ceased.
 Fixed Monthly Earners
 Payments cannot have
o Work – Basic + Holiday
frequencies of less than 1 month.
premium
Additional Pay o No work – Basic only
 Daily wage earners
 Cost of Living Allowance
o Work – basic + holiday
 Holiday pay
premium
 Overtime pay
o No work – no pay
 Other benefits
Overtime pay
Types of Holidays
 Premium for service beyond 8 hrs.
1. Special holiday or rest day
 Regular rate x 1.25 x hours
2. Special holiday falling on a rest
day
3. Regular holiday
4. Regular holiday falling on a rest
day Overtime Pay
*See last page for list of holidays to Regular Work Hourly rate x 1.25
follow Day x hours of OT
Special Holiday Hourly rate x 1.3 x
Basic + Holiday or rest day 1.3 x hours of OT
Holiday Premium Special holiday Hourly rate x 1.5 x
Pay and rest day 1.3 x hours of OT
Reg Work 100% None Regular holiday Hourly rate x 2 x
Day 1.3 x hours of OT
Special 130% 30% Regular holiday Hourly rate x 2.6
holiday or and rest day x1.3 x hours of OT
rest day
Special 150% 50%
holiday Note: Undertime work cannot be offset
AND rest by overtime work
day

Study well
Who can receive OT pay?  Christmas bonus
 Gratuity pay (given in return for
 Those authorized to work OT
service)
 Rank and file workers, laborers
 Insurance or Retirement fund
REMEMBER!!!: Managers, supervisors,  Education, Housing, etc.
foremen, should not be given OT pay  SSS/PHIC/HMDF share from
due to conflict of interest employer
 Vacation leave
Where to charge OT Premium
 Personal/Emergency Leave
Rush Order WIPI  Sick Leave/Maternity benefits
Slow Factory Overhead
Production,
greater volume
of work,
inadequate plant
capacity
Inefficiency Loss

NOTE: Night shift is from 10PM TO

6AM. Rate = 10% premium
13TH Month Pay

 Is a mandate for employers with at

least 10 employees to give a 13th
month pay for those who have
worked for at least a month
 Shall be paid on or before
December 24.
 Employees who rendered a year’s
worth of work will be given an
average of a full month pay.
 If less than a year’s worth of work,
13th month pay is a pro-rated
average monthly pay.
 Unlike bonus, 13th month pay is
MANDATORY

Fringe and Other Benefits

 Other wages
 Medical and Dental benefits

Study well
Treatment of Sick Leave Benefits Procedures in labor cost control

SLB/MATB = • Dr.  Production planning

Benefit from SSS Receivable
 Use of labor standards and
from SSS if
budgets
paid by
company  Labor performance reports
• No entry if  Appropriate compensation
otherwise including wage incentive
SLB/MATB > Excess is charged systems
Benefit from SSS to employee
benefits Three phases of accounting for labor
 Timekeeping
Payroll deductions  Financial accounting
 WH Tax  Cost accounting
 SSS/PHIC/HDMF share from
EMPLOYEE Forms Used
 Union Dues  Clock card (time card)
 Undertime or Tardiness
 Cash Advances  Time ticket (job ticket)

Departments involved in labor cost  Daily time report

control  Payroll sheet
 Production planning  Employees’ earnings records
 Personnel
 Time and motion study

 Budgeting
 Timekeeping
 Accounting

Study well
List of Holidays
Regular Holidays

January 1 New Year

April 9 Araw ng
Kagitingan
April 18 Maundy Thursday
April 19 Good Friday
May 1 Labor Day
June 5 Eid’l Fitr
June 12 Independence
Day
August 12 Eid’l Adha
August 26 Nat’l Heroes Day
November 30 Bonifacio Day
December 25 Christmas Day
December 30 Rizal Day

Special Holidays to Follow (so far)

February 5 Chinese New

Year
February 25 EDSA
Anniversary
March 16 Araw ng Dabaw
April 20 Black Saturday
May 13 Elections
August 16 Kadayawan
August 21 Ninoy Aquino Day
November 1 All Saints’ Day
November 2 All Souls’ Day
December 8 Immaculate
Conception
December 24 Christmas Eve
December 31 New Years’ Eve

Study well