Indirect labour, direct labour and overtime premiums

Re:Indirect labour, direct labour and overtime premiums

If Joe working a standard 8 hr day actually does 10 hours which is basic and which is overtime premium?
Do I put the full 2 hrs overtime into overtime premium or do I only put part of the overtime into the premium column. i.e 2 hrs @ time and half into premium colum or only the 'half'?

If Joe works ten hours (instead of eight), then he has worked two hours overtime. Overtime premium is the amount he is paid over his normal rate.

For the sake of this discussion, lets say Joe earns £6 per hour, and is paid at time-and-a-half for overtime.

This means that he earns £9 per hour for overtime, for which £3 per hour is overtime premium.

So we can do the 8 hours + 2 hours overtime two ways:

STANDARD 8 hours × £6/hour = £48
OVERTIME 2 hours × £9 = £18
TOTAL LABOUR = £66

or
LABOUR 10 hours × £6/hour = £60
OVERTIME PREMIUM 2 hours × £3/hour = £6
TOTAL LABOUR = £ 66

I would prefer to do it the second way, because it's easier to identify the overtime premium later.

I'm assuming that direct labour cost is the 8 hrs and the extra 2 hours (at time & half) is indirect.

Don't assume it. Read the question very carefully. Usually, all ten hours will be counted as Direct Labour at 'single rate' (since that is how long was actually worked), and the two hours at 'and a half' will be counted as indirect. This will not always be the case, so be careful.

In the example above, if overtime premium is considered Indirect Labour:

Direct Labour: £60
Indirect Labour: £6

Hope this helps

Graham