Labor Rate Calculation

The costs incurred by the workers involved in the production process must be taken into consideration in product costing. Using labor cost calculation, you determine the labor cost rate per hour (gross) for the individual labor groups, depending on the location factors, qualification level and the shift model. The hourly labor rate of a worker is calculated based on the hours worked and the labor cost defined per unit of time.

Labor rate calculation is based on the following characteristics:

  • Qualification level (labor group)
  • Industrial sector and production location of the reference company
  • Location factors, such as which shift model, number of working days per week
  • Fringe labor costs
  • Work productivity

Labor Rate Calculation

Depending on the selected valuation, you can calculate the labor rate using the following methods:

Manual input of the labor rate (Valuation: Estimation)

You can enter a labor rate in the Details view of the worker, regardless of the data in the FACTON content and the detailed fringe labor costs. Use the valuation Estimation.

Labor Rate Calculation with precalculated fringe cost rate (Valuation: Default)

The labor rate is calculated by adding shift premiums, fringe cost, weekend premiums and performance bonuses to the basic wage, depending on the location, industrial sector and referenced calculation year. Use the valuation Default.

With this method of labor rate calculation, you use a precalculated fringe cost rate from the FACTON content.

Labor Rate Calculation with fringe cost rate calculation (Valuation: Fringe Cost Rate Calculation)

In this method of labor rate calculation, you use an integrated calculation of the fringe cost rate to reflect the fringe costs in detail. To do this, use the valuation Fringe Cost Rate Calculation.

The labor rate is not calculated until you have entered a basic wage for the worker in the Details view ► Labor Rate Calculation. Shift premiums, fringe cost, weekend premiums and performance bonuses are added to this basic wage, depending on the location, industrial sector and referenced calculation year.

With this extended labor rate calculation method, you can enter additional fringe cost parameters, such as:

  • Social security contribution parameters
    • Health/longtime care insurance contribution rate, unemployment insurance, pension insurance percentage
    • Employers liability insurance
    • Other accident insurance
  • Special payment parameters
    • Paid vacation days/ christmas/bank account administration allowance
    • Capital formation savings payment
    • Fringe benefits
  • Paid absenteeism parameters
    • Vacation, sick and training days
    • Christmas and new year's leave
    • Employee meetings

Value Rules for Labor Cost Calculation

You can create value rules to centrally manage some of the parameters relevant to labor cost calculation depending on the location and validity period in the master data.

Further information, see: Wages