Incentive Schemes I - Labour Cost, Cost Accounting Video Lecture | Cost Accounting - B Com

incentive plans what are these let's
understand that so far we have
understood how to calculate your gross
pay and in that we have understood how
to calculate basic pay and also overtime
pay basic pay a sum is something that
you have promised with your employees
you would be paying irrespective of
anything like any it is not connected
with the time or or the tough work done
it is we can say that it is more of a
promised wait that you would be paying
to him for the for the hours he has
attended the production process okay
whereas overtime pay is the pay that is
kind of a compensation to an employee
for the time he has worked more or above
then the greet time at a particular day
as the name is suggesting incentive
wages
our incentive wage payment plans are
introduced in an organization to share
the benefits with the employees of any
increased profits or output so that they
are more motivated the actual reason or
the purpose of introducing the incentive
plans is to reduce your cost per unit
and now you that done when we calculate
the labor cost irrespective of the
direct or indirect labor we have two
kinds of costs one that is fixed in
which and the other one is variable okay
now when you
Skeen that will definitely push the wage
per unit or wage per hour after they
employee okay but this will be affecting
only the variable portion of the very
labor cost the fixed portion of the depo
cost will stay the same it's not going
to change now because of that increased
wages employees would be happy and
possibly the efficiency and
effectiveness of the labor would
increase and that will cause increase
production and because of the increased
production we can also say that
economies of scale will be enjoyed by
the entity so with more units produced
definitely variable cost will be
increasing and it will be increasing
proportionately with the number of units
produced however your fixed cost is not
going to change okay so because of that
your total labor cost will reduce our
unit total cost per unit total labor
cost per unit will be reducing because
of the incentive wage plans now we have
different remuneration methods or
different methods to implement that will
provide incentives to the employees for
the increased efficiency or
effectiveness now from the examination
point of view what we have to observe or
what we will be expected from the
examiner will be given
question Orson are you which will be
telling you that okay this is the
current state this is the wage we are
paying to an employee at the moment and
we have a proposal given by a supervisor
or someone
and according to the incentive plan we
are expecting this much increase in the
efficiency or production or productivity
or whatever and in that situation you
will have to calculate the profitability
before introducing incentive scheme and
after introducing the proposed incentive
schemes and then you will be deciding
whether it is fruitful for us to
introduce the incentive scheme or not
because you know if you are going to pay
extra to an employee and you are not
getting anything extra out of it and
more than that you are not getting extra
which is or we are not getting the
benefit which is more than the cost you
are paying extra it's of no use
okay to be giving you no good so again
the basic reason behind introducing
incentive scheme is that if you are
going to be an extra burden off labor
cost you should be getting extra
benefits out of it as well and we will
always try to get benefits more than the
expenses that you are going to pay as
part of an incentive scheme okay now
when we talk about incentive schemes we
have two kinds of incentive schemes that
we can introduce one is the individual
incentive scheme and the other one is
the group incentive see
if you are able to
moments of each of the employees
individually then you can introduce
individual incentive scheme that only
that person would be getting the
increased wage rate or appreciation of
some kind but most of the situation you
are unable to calculate the performance
of each individual because many times
individuals are working as part of a
team so whole team will be performing
the effort of every individual depends
on the effort of the others so in that
case you cannot introduce individual
incentive scheme and in that case you
have to have group incentive scheme in
place now according to our syllabus we
have to calculate the incentive ities or
bonus like if we have individual bonus
or individual incentive scheme going on
and how to calculate in that situation
or if the group incentive scheme is in
place then how are we going to calculate
the wages of employees in that system
this will be looking in few minutes okay
but if we classify the incent
schemes then we can classify incentive
schemes in two ways I mean how the
benefits are shared with employees if
you try to classify incentive schemes on
on the basis we share the benefits with
employees then we can share the benefits
or we can provide incentive on the basis
of results or we can also provide
benefits on the basis of the work done
you might be thinking that it's kind of
a shame that if I say the result of work
done well in many situations yes it is
the same but here what we are trying to
say that result actually translates into
time saved okay and in here what we are
talking is the number of units produced