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Stage 2 · What goes in

CAS-7: Employee Cost

Twelve tailors, a three-day power cut and a school in a hurry. Find out what an hour of work really costs, and who pays for the rush.

What you will learn in CAS-7

  • What employee cost includes and leaves out (§4.7, §5)
  • The hourly employee cost (§5.6)
  • Normal and abnormal idle time (§4.2, §4.8, §5.9)
  • Overtime premium and who carries it (§4.12, §6.6)

Chapters

  1. What does a tailor really cost? · Pay, plus what Selvi pays on top: PF, ESI and bonus (§§4.7, 5.1, 5.5)
  2. What does one hour cost? · The hourly employee cost, worked out step by step (§§4.8, 5.6)
  3. Three days without power · Usual idle time stays in the cost; unusual idle time is kept out (§§4.2, 4.8, 5.6, 5.9, 6.7)
  4. The school wants it a week early · Overtime: the extra paid for working late, and who carries it (§§4.12, 6.6)
  5. Spot the mistakes in the employee cost · Use everything from this lesson (§§5, 6)

Key terms

  • Employee cost (§§4.7, 5.1, 5.5): Everything paid to or for employees because of their work: pay and allowances, the employer’s share of PF and ESI, bonus, and future benefits such as gratuity. Workers supplied by a contractor are not your employees; their cost is a contract expense.
  • Normal and abnormal idle time (§§4.2, 4.8, 5.6, 5.9, 6.7): Idle time is the paid time when no work is booked. The usual, expected kind stays in the cost (it is built into the hourly rate). Abnormal idle time, from rare events like a long power cut, is kept out of employee cost.
  • Overtime premium (§§4.12, 6.6): The extra paid above the normal rate for working beyond normal hours. It is put on the specific order when that order caused it (for example, the customer asked for the rush); otherwise it is treated as an overhead and shared.

Common questions

What is included in employee cost under CAS-7?

Pay and allowances plus the employer’s cost of benefits such as PF, ESI, bonus, gratuity and leave encashment (paras 4.7 and 5.1). The cost of a contractor’s employees is not employee cost.

Is abnormal idle time part of employee cost?

No. Material and quantifiable abnormal costs, such as a long power cut, are excluded (para 5.9).

Where does the overtime premium go?

Directly to the order when the overtime was for that order (for example, at the customer’s request); otherwise it is treated as an overhead (para 6.6).

CAS-7 (Revised 2017), Employee Cost. Checked against the standard in November 2026. Selvi Garments, the school order and every figure in this lesson are fictional. Read the official text on the ICMAI Cost Accounting Standards page ↗ before applying it to real work.