Types of Wages | Types of Labour Cost | Accounting for Labour

Types of Wages

Generally, there are three systems for wage payment or wage calculation; they are:

(1) Time wage system

(2) Piece wage system

(3) Incentive wage system

But they are modified into different methods as per requirement by the different scholars.

Out of them some important or frequently used wage rate systems are given below:

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Types of Labour Cost

There are types of labour cost; they are direct labour cost and indirect labour cost.

Payment made to labour is known as wages.

Direct wage cost

The labour who is directly engaged with production is known as direct or productive labour.

The payment paid to direct labour is called direct wages.

Such wages are expressed in term of unit of output (production or service)

Examples:   

Wages paid to stitches in a garment factory,

Wages paid to carpenter in a furniture industry,

Wages paid to weavers in cloth mill etc.

Indirect wages cost

Wages paid to workers engaged in an operation other than manufacturing are called indirect labour.

Such workers do not engaged in production activities directly.

They support to direct workers.

Indirect wages cannot be expressed as per unit of output (production or service)

Example:

Remuneration paid to factory managers,

Salary paid to factory foremen, inspectors, helpers, cleaners, guards etc.

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