bonuses-labour costs - The Book-keepers Forum (UK)

rafapak · Senior Member

bonuses-labour costs

see bee · Veteran Member

Could it mean this: say this employee produces 36 in an hour, the additional hours' worth of production would be 0.5. If the hourly rate is say £10, the bonus then would then be half the hourly rate multiplied by 0.5 hour. This is (£10/2)*0.5=£2.50.

Casu · Senior Member

see bee wrote:
Could it mean this: say this employee produces 36 in an hour, the additional hours' worth of production would be 0.5. If the hourly rate is say £10, the bonus then would then be half the hourly rate multiplied by 0.5 hour. This is (£10/2)*0.5=£2.50.

Where do you get 1/2 from?

Q was 1 hr extra production at 1/2 the hourly rate. Not 1/2 hour extra production at 1/2 the hourly rate!!!

Rafal, you have been asked several time to add the Q, so specific assistance and if needs be answers can be given round your Q. Better than giving folk only 1/2 of your scenario and asking them to make up the rest, as can be seen by the response given, it then proves problematic.

using sees figures 36 produced in an hour (yours 24) means in an extra hour 36 extra are produced (24 In yours.

for this they are paid 1/2 the hourly rate.1/2 of £10 = £5 bonus as well as, don't forget, the £10 wage.

VinceH · Expert

I'm inclined to interpret it the same way as See Bee.

The 1/2 comes from interpreting this: "a bonus equal to half the hourly rate for the additional hours' worth of production" - specifically "the additional hour's worth of production." That "hour's worth" makes it sound proportional.

If the proscribed rate is 24 per hour, and 36 are produced in that hour, that's an additional 12 - which is an extra 1/2 of the expected hourly amount, or the equivalent of half an hour's work. Therefore the amount of bonus paid is "half the hourly rate" for the half hour's worth of extra production.

It comes down to semantics on the wording of the question (which is a bad thing, TBH - in an exam situation, if the answer depends on the interpretation of a question which isn't 100% clear and unambiguous, the examiner has failed rather than the student.)

Leger · Master Book-keeper

Oh sorry Vince, I disagree (noted both your's an Caron's comments on wording and not having the full question)

The expected production rate is 24 units per hour. In any one day if this target is exceeded the employee receives a bonus equal to half the hourly rate for the additional hours' worth of production.

My reading of the question is an extra hours worth of production in the day. In that case I would interpret it as normal wage for the day + bonus of 0.5 of the extra hour productivity (eg £10 an hour the bonus would be an extra fiver for that day.

Artois · Guru

I read it as if they do an additional 24 over the course of the day then they receive a bonus of half their hourly rate, but yes it is badly worded

VinceH · Expert

John:

If it said "if the target is exceeded the employee receives a bonus equal to half the hourly rate" I'd agree - but it goes on to clarify that it's "for THE additional hours' WORTH of production".

I've capitalised those two words because they are key. If THE was AN, it would still fit your interpretation. (Or my interpretation of your interpretation. Or something.) And the WORTH is why I pointed out it looks proportional to the normal hourly rate based on number produced.

Artois · Guru

Hi Vince

But it reads to me as unless an additional 24 are made then there is no bonus it says nothing about apportioning if less is made

VinceH · Expert

Correct, it doesn't use the word apportion - it's the context of the word "worth" that does it: "the additional hours worth of production" - if 24 is the proscribed amount, then an extra 12 works out at half an hour.

Look at the issue (rather than the question) from another angle. If it isn't apportioned and you're just paying an extra half hour for any extra made above the proscribed amount, what is the incentive for the employee to put in the extra effort to make any more than one extra?

One extra (at a rate of £10/hour) is £5, just as 12 extra is £5. Why put the effort in to make that many extra? It's a nonsense.

Also, all of a sudden where at the rate of £10/hour the employee cost per unit is £0.42, but if the bonus is half an hour regardless of how many is made, the bonus for that ONE extra means the actual cost for that single unit is £5.00 - more than then times as much. It averages out more marginally - for the hour it would be £0.40, and for the day £0.41ish - but the idea of pushing up your cost by £5 to make one more of something that costs £0.42 is a(nother) nonsense.

Apportioning it according to the hourly rate makes a lot more sense - the employee is getting paid more according to how many they make, and the cost per unit goes DOWN instead of up.

At £10/hour, the 24 means a cost per unit of £0.42 as before. With an apportioned bonus of half the hourly rate for exceeding the proscribed amount, making just one extra would mean the employee gets an additional £0.21 (and the cost per unit is as near as damn it the same), but for 12 extra they get an additional £5; the cost per unit of those extra 12 is just £0.21, and averaged for the hour that's a cost per unit of £0.28.

So either the question is about a company paying a bonus that could cost them money and give the employee no incentive other than to take advantage of that (your interpretation), or it's a question about a company paying a bonus that could improve their profits while at the same time giving the employee an incentive to help them do that (my interpretation).

Which one makes more sense now?

VinceH · Expert

(Can't be bothered to edit)

Those numbers are wrong, because I agree with what See Bee said - it's half the hourly rate x the extra produced as a portion of the hourly number - so the figures should be based on £2.50 extra not £5. But the principle still applies: If it isn't apportioned it would incentivise the employee to produce precisely one extra and no more, because it maximises their return for the minimum additional effort.

Artois · Guru

Not sure what you mean about the employee only doing one!

I am saying unless they do 24 they do not receive a bonus

VinceH · Expert

Ah, yes, Doug - sorry, I was conflating the different responses/interpretations, and I can see how the phrasing leads to that.

But in that case, if the employee ups their production rate from more than two and a half minutes per item (24 per hour) they'd have to be sure of being able to keep it up long enough to produce an extra 24; any less than that, the company would gain from the extra produced and they'd get nothing for the additional effort.

That's wagered bonus rather than a waged one.

(I put that on a separate line because it's such a good play on words!)

Leger · Master Book-keeper

VinceH wrote:
John:

If it said "if the target is exceeded the employee receives a bonus equal to half the hourly rate" I'd agree - but it goes on to clarify that it's "for THE additional hours' WORTH of production".

I've capitalised those two words because they are key. If THE was AN, it would still fit your interpretation. (Or my interpretation of your interpretation. Or something.) And the WORTH is why I pointed out it looks proportional to the normal hourly rate based on number produced.

Hi Vince

I agree that they are key, as it was how I came to my conclusion. eg over 8 hours it expected that 192 units will be made. That day they made 216 units which is the same as your emphasis. Now if they do 240 units that is 2 hours worth and it's a £10 bonus. If they do 204 it's half hours worth and the bonus is £2.50.

Artois · Guru

But as I said unless an additional 24 are done then no bonus, no need to apportion in my opinion, and yes it is all in the favour of the Employer, do 1 extra nothing do 23 extra still nothing!

Leger · Master Book-keeper

Hi Doug.

I can see your point, although I haven't interpreted it the same way. Would you expect them only to get the same bonus if they did an extra 48 units (2 hours worth)?

rafapak · Senior Member

thanks guys for replies. I included illustration in my corrected thread on bonuses. Maybe after you watch illustrations you will have clearer understanding of what is going on with bonuses in my exercise.

-- Edited by rafapak on Sunday 16th of February 2020 05:10:44 PM

see bee · Veteran Member

Casu wrote:
see bee wrote:
Could it mean this: say this employee produces 36 in an hour, the additional hours' worth of production would be 0.5. If the hourly rate is say £10, the bonus then would then be half the hourly rate multiplied by 0.5 hour. This is (£10/2)*0.5=£2.50.
Where do you get 1/2 from?
Q was 1 hr extra production at 1/2 the hourly rate. Not 1/2 hour extra production at 1/2 the hourly rate!!!

To sum up the confusion: "hourly rate" could be hourly production rate or hourly pay rate.

But yes, the question is not perfectly worded - hence our confusion as to its meaning.

Casu · Senior Member

see bee wrote:
Casu wrote:
see bee wrote:
Could it mean this: say this employee produces 36 in an hour, the additional hours' worth of production would be 0.5. If the hourly rate is say £10, the bonus then would then be half the hourly rate multiplied by 0.5 hour. This is (£10/2)*0.5=£2.50.
Where do you get 1/2 from?
Q was 1 hr extra production at 1/2 the hourly rate. Not 1/2 hour extra production at 1/2 the hourly rate!!!
To sum up the confusion: "hourly rate" could be hourly production rate or hourly pay rate.
But yes, the question is not perfectly worded - hence our confusion as to its meaning.

1) cut it out misquoting. The part that caused the issue, was not down to terminology but to a massive chunk of missing information as I stated right at the outset.

2) there was absolutely no need to 'sum up the confusion', its really condescending.

VinceH · Expert

Hi John,

I agree that they are key, as it was how I came to my conclusion. eg over 8 hours it expected that 192 units will be made. That day they made 216 units which is the same as your emphasis. Now if they do 240 units that is 2 hours worth and it's a £10 bonus. If they do 204 it's half hours worth and the bonus is £2.50.

I can't be bothered to look back over the numbers, but that's what I was saying - as was See Bee. So when you said you disagreed, in fact you agreed. Confused? You will be... after this episode of SOAP.

Leger · Master Book-keeper

Hi Vince

Lesson 1. learn to read. I thought See bee had come up with £2.50 for an extra hours worth of production, (and you were agreeing with that calculation), when in fact he was saying IF an extra 12 units had been produced, the answer would be £2.50 based on £10 an hour.

I was misled by thinking he was giving the answer to the question as written, which I understood to be £5

That culpa bloke again.

VinceH · Expert

I know him well. ;)

Cheshire · Master Book-keeper

OOO, I missed a (sort of) technical debate! ish

Rafal, please always add the Q as a picture/pdf. Once you have qualified you will find that we still often have to ask questions to elicit more info from the initial post, even when its not a study question as folk often miss the crux of the issue from their ponderings and we have to really dig beneath to find out what the real Q is. Im sure I drive a few folk mad by answering their question with a pile of other questions, but often its a necessity to provide the correct help.

see bee · Veteran Member

Apologies Casu, unintentional again.

And who remembers what's in mid February?
Let me know if you need a hint!

Cheshire · Master Book-keeper

see bee wrote:
Apologies Casu, unintentional again.

And who remembers what's in mid February?
Let me know if you need a hint!

I do hope that you are not going to hijack Rafal's thread for your own ends.

Valentines was almost in mid Feb, it's now 18th so you've missed the boat.

rafapak · Senior Member

Cheshire wrote:
OOO, I missed a (sort of) technical debate! ish

Rafal, please always add the Q as a picture/pdf. Once you have qualified you will find that we still often have to ask questions to elicit more info from the initial post, even when its not a study question as folk often miss the crux of the issue from their ponderings and we have to really dig beneath to find out what the real Q is. Im sure I drive a few folk mad by answering their question with a pile of other questions, but often its a necessity to provide the correct help.

I am sorry Joanne I haven't included illustrations with solutions when I placed my initial post. I attached solutions in my second thread on bonuses. I promise I will be more careful with my next posts . Actually I came across similiar problem in my later chapter in my book buy need to find time to make photos and if I post my message illustrations will be included so that people will not be confused anymore

see bee · Veteran Member

Joanne - no I wasn't referring to Valentine's. And yes, I am a little late; thought you might appreciate that tho.
And because I wouldn't want to high jack someone else's post, I will bring up my old post. Hang it there!

Casu · Senior Member

see bee wrote:
Joanne - no I wasn't referring to Valentine's. And yes, I am a little late; thought you might appreciate that tho.
And because I wouldn't want to high jack someone else's post, I will bring up my old post. Hang it there!

Valentines being 14th. 14th being middle of month for Feb....oh never mind...