## 1.1 Definition:

Barth Variable Sharing Plan is a rewarding scheme where by the employer does not promise to pay anything extra amount to the employee even if the latter has worked overtime. So, this approach does not give a time rate guarantee to the worker. This implies that workers are only paid for the standard hours.

## 1.1 Formula for Barth Variable Sharing Plan or Method

So, how is the total wage income under Barth Variable Sharing Plan computed?

## Example

Watson worked for 30 hours to complete a task assigned to him. The standard time set was 45 hours and with an hourly rate of \$10.5 per hour. Using Barth Variable Sharing Plan, determine the total wages paid to Watson.

Solution

## 1.2 Advantages of using Barth Variable Sharing Plan to Compute Labor Cost

1. Suitable for the newly employed workers
2. Economical to the organization because no payment of extra hours worked. That is, this scheme does not give a time rate guarantee to the worker. Hence the organization saves money
3. Simple to compute.

## 1.3 Disadvantages of using Barth Variable Sharing Plan to Compute Labor Cost

1. Less motivating to the employees.
2. Not popular amongst the firms.
3. Does not propel increase in productivity.

About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.