Payroll Accounting - 2024

PART 3- LABOUR
CONTROL
Bonus Pay Systems
 Bonus pay is compensation over and above the amount of pay

specified as a base salary or hourly rate of pay.
 Bonus systems are payment systems designed to increase
production by the awarding of incentives to productive employees
who produce output during the designated time (standard time
allowed).
 Why Pay Out Bonuses?
 Efficient workers save the organization time and improve
efficiency. They should be rewarded for this.
 The bonus is a thank you to efficient employees.
Cont….
 It is usually at 50 % or so that the saving

is shared with the organization.
 Bonus pay is also used to improve employee

morale, motivation, and productivity.
 When you tie bonuses to improve

performance which in turn helps the company
reach its goals.
Example
 Timothy works in a company which

manufactures components for printers.
The basic working week is 40 hours and
overtime is paid at normal + 50%.
The company operates a bonus scheme.
50% of the hours saved against a standard
time allowed are paid at the basic rate of
P50.00 per hour. The following details
relate to the job completed during week
ended 31 May 2024:
Timothy
Job 83PJF component VD60 120 units
Hours worked job 83PJF 38 hours
Hours booked to idle time 2 hours
Hours attended to be paid 40 hours
Allowed time per unit of VD60 25 minutes
Required: Calculate
a) the amount of bonus payable

b) the total gross wage
Workings
1. Since Timothy worked 40 hours (38 hours + 2 idle hours), there is no

overtime.
2.
Time allowed for output is 25 minutes x 120 units = 3,000 minutes
3,000 minutes /60minutes = 50 hours
Time Taken = 38 hours, do not consider idle time
Therefore Time Saved = 12 hours

Cont.. for Motheo
Bonus-hours 6 (50 % or ½ the hours saved)

Bonus payment 6 hrs x P50.00 per hour= P300.00
b) the total gross wage

Basic Pay (38 hours x P50.00) P1 900.00
Idle Pay (2 hours x P50.00) 100.00
Bonus 300.00
TOTAL GROSS WAGES P2 300.00
Payroll Accounting
A payroll is a company's list of its employees, but the

term is commonly used to refer to:
the total amount of money that a company pays to
its employees
acompany's record of its employees' salaries and
wages, bonuses,
bonuses allowances to derive total earnings,
and other deductions (employees share of Medical
aid, pension fund and withheld taxes to derive their
net pay.
Payroll Accounting- Labour
Payroll and benefits include items such

as:
Salaries / wages
bonuses & commissions to employees
overtime pay
employer paid benefits e.g insurance,
sick days, retirement plans
Basic Pay
Defined:
 Is a fixed or ordinary amount of salary that
an employee is eligible for in return of the work
he / she does.
It includes the normal rate pay for any
overtime pay (the direct labour part), but not
the overtime premium (indirect labour part).
It does not include benefits, bonuses or any
other potential form of compensation from the
employer.
Gross Earnings
 Gross earnings is the total compensation

earned by an employee.
 It consists of wages or salaries, plus any
bonuses, overtime pay and commissions.
 Gross earnings are subjected to tax
(taxed at a certain rate).
 The difference between gross pay and
the amount actually received is
attributable to payroll deductions.
P
e Pension (retirement)
Contributions
 A pension plan is an agreement whereby an
employer provides benefits to employees after
they retire.
 The employer usually the sponsors the pension
plan, but employees can also pay an additional
amount to the pension plan.
 Pension contributions are not taxed when
deducted monthly from the employee, but will
likely be taxed when the employee retires.
 The contributions are paid / sent by the
employer to pension administrators (such as
Botswana Life, Alexander Forbes, AON, etc).

Pay As You Earn (PAYE)
It is a system by which income tax is

levied on wage and salary earned.
The income tax is deducted from the

employees gross salary and is paid by
employers directly to the tax department.
Payroll Deductions
 Tax
 Other deductions e.g

 Pension Contribution- calculated on basic salary
 Medical Aid Contribution- also calculated on
basic salary
 Union Contributions
 Insurance premium (car, home, life Insurance)
etc
Question on payroll-
 Yellow Khakhi has four employees.

Allowable hours are 40 hours a
week and they are paid on a
biweekly basis with overtime paid
for all hours worked above
allowable hours. The overtime rate
is 1½ times the regular rate of pay.
 The payroll information is as follows.
Employee Employee Rate per Marital Allowance Union
per month
Number Hour Status Member
(BWP)
Judy Toy
111 P15.5 Single 400 No
0
Tim Moss
112 P16.2 Married 280 Yes
0
Jennifer Ben
113 P15.9 Married 280 Yes
0
Gail Job
114 P17.0 Single 280 Yes
0
During the period ending August 16 2024, Jennifer
worked 78 hours, Tim worked 86 hours, and Judy and
Gail each worked 72 hours. The income tax is deducted
at 12% of the gross earnings. Compute mandatory
pension contribution of 7.50% and Medicare Aid
contribution of 5%. Union member pay weekly dues of
P10.00.
Required
Prepare a payroll register for the two weeks duration
ending August 16, 2024. List employees in alphabetical
order by using last name.
 Note:Pension and medical aid
contribution are a percentage of
the basic salary.
 Taxcalculation= (Total earnings
minus pension contribution) X Tax
rate.

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PART 3- LABOUR

 Bonus pay is compensation over and above the amount of pay

 It is usually at 50 % or so that the saving

 Bonus pay is also used to improve employee

 When you tie bonuses to improve

 Timothy works in a company which

a) the amount of bonus payable

1. Since Timothy worked 40 hours (38 hours + 2 idle hours), there is no

Therefore Time Saved = 12 hours

Bonus-hours 6 (50 % or ½ the hours saved)

b) the total gross wage

A payroll is a company's list of its employees, but the

Payroll and benefits include items such

 Gross earnings is the total compensation

It is a system by which income tax is

The income tax is deducted from the

 Other deductions e.g

 Yellow Khakhi has four employees.

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