Idle Time and Overtime

In one line

Idle time is time paid for but not worked; overtime is time worked beyond the statutory hours and paid for at twice the rate; and in both, the accounting question is who bears the extra.

Idle time

Idle time is the difference between the time a worker is paid for and the time booked to jobs. The attendance record gives the first figure and the time booking record the second, which is why the previous chapter had to come first.

Normal idle time

Inherent in the work and unavoidable, so it is treated as a cost of production:

• the time taken to walk from the gate to the workplace;
• setting up a machine, and cleaning it at the end of a shift;
• tea breaks and time for personal needs;
• normal waiting for instructions, tools or the next job;
• the fatigue that no employer can remove.

Treatment. Two methods are permitted, and both are correct:

1. Inflate the direct labour rate, so that the productive hours carry the idle hours; or
2. charge it to factory overhead as an item of indirect labour.

Abnormal idle time

Avoidable, and not inherent in the work, so it is excluded from cost altogether and charged to the Costing Profit and Loss Account:

• a machine breakdown or a power failure;
• a shortage of material caused by bad purchasing;
• a strike or a lock-out;
• a fire, a flood or an accident;
• want of orders, where the plant is kept idle for want of work.

The reason it is excluded is the reason it appears in a reconciliation. Costs must be comparable between periods, and an abnormal loss in one month would make that month's cost per unit meaningless.

Idle time worked

A worker is paid Rs 45 an hour. In a month he is present for 200 hours, of which 10 hours are normal idle time and 10 hours abnormal idle time caused by a power failure. Compute the wages, the amount charged to costing profit and loss, and the inflated hourly rate.

Inflated hourly rate = 8,550 divided by 180 productive hours = Rs 47.50 an hour.

Read the answer. The worker's rate is Rs 45, but each productive hour costs the factory Rs 47.50, because the normal idle hours have to be paid for out of the productive ones. The abnormal ten hours are not in that figure at all.