Post on 23-Jan-2015
description
Incentive schemes
Helping to make competition Irrelevant
Incentive Schemes
What Really Motivates People at WORK!!
Is it Money
Is it Position
Is it Recognition
Is it Job Satisfaction
Piecework has been there for years and
years
People are Highly
Motivated and skillful
under piecework
No obligations
for employer,
Historical system- Piecework
Cost effective systems…
No work, No employees
Virtually no supervision is needed
Make through – One person
makes the whole garment
Batch System -Group of
operators working together
Piecework Systems- 3 types
Line system- Every
operation has a rate
Labour Rate per piece Lower Up to 46% Higher
Cost Per pc depends on Work Content Market Rate
Attrition Rate Lower Higher
Compare Salary Piece Rate
Cost depends on SAMCost depends on
Present labour demand
Quantity can be forced by incentive Scheme
More production more money. Quality is not mandatory
They stay with the companyThey move wherever the pay is
higher
polo shirt polo shirt -LS
round neck T shirt
fleece pant Men's Brief Ladies Short Tank
Hood Shirt Pillow cover
Fitted Sheet
Flat Sheet Pillow cover
Quilt cover0
5
10
15
20
25
30
salary system piece rate
Studies show labour rate is higher in piece rate system
Operators focus on Quality Quantity
Labour Rate per piece Lower Up to 46% Higher
Cost Per pc depends on Work Content Market Rate
Operators focus on Quality Quantity
Attrition Rate Lower Higher
Compare Salary Piece Rate
They stay with the companyThey move wherever the pay is
higher
Product Change No problem Price negotiation
Advanced Technology Welcome Resisted
Capacity Fixed Varies with labour availability
Company can hire and fire as they want.
Labour may not be available when needed.
Will help them work Will reduce earning opportunity and piece rate
Will reduce work Will reduce earning
Work study and Method Improvement Welcome Resisted
Fixed number of employees in the company
Product Change No problem Price negotiation
Advanced Technology Welcome Resisted
Capacity Fixed Varies with labour availability
Work study and Method Improvement Welcome Resisted
Labour Rate per piece Lower 46% Higher
Cost Per pc depends on Work Content Market Rate
Operators focus on Quality Quantity
Attrition Rate Lower Higher
Compare Salary Piece Rate
Will reduce work Will reduce earning
Challenges of Piece work system
Most factories do not have the systems to
establish proper methods and Standard
times
Hence the Rate is decided by a mutual
negotiation
Until rate is settled there is huge loss of
productivity
To decide a fair rate is most critical step
Things are changing
Number of Pieceworkers are
reducing Industry is expanding Margins are very
tight
For a complaint factory disciplined labour is a MUST!!
Pieceworkers earn less annually, hence “Piece work earns more” is a myth..
The solutionIncentives Adds benefits of piece rate to Salary System
• Focus on Quantity• Capacity increases with efficiency• Less cost incurred
• Option to earn more money• No price negotiation problem• Less Troubles
Company
Operators
Convert from Push to Pull
• Easy for Managers• Easy for the Supervisors• Quality will improve • Motivated workforce• Downtime will reduce• Operators will demand better services:
– Supply of work– Better Planning– Line Balancing– Mechanic’s service
Quality ?
Pre-requisites of a structured Incentive Scheme
The company Must Establish best methods and fair standard times
Fool proof tracking of operator performances
Easy to understand, Must be fair to all
Mutual agreement required
No limits to earnings
Supervisors , IE’s and indirect Must be included
The carrot should be worthwhile going for..
WIP Progress levels must be controlled
Few Suggestions for a suitable Incentive scheme
Example :
Jump Start Bonus Rs. 350
Efficiency Start level = 50%
Must achieve monthly average of 50% to earn Rs. 350
Example:Attendance Bonus Rs.400
No absent 4001 day absent 3002 days absent 1503 days or more 0
Attendance Bonus
Jump Start Bonus
Individual Bonus
Group Bonus
400
350
•Quick pace builder and motivator
•Start level Must be achievable
•Everyone achieving this level is eligible
•Helps to establish trust between
management and workers
Example:
Based on attended daysRules of deduction to be made for• One day absent• 2 day absent• 3 days or more
Attendance Bonus
Jump Start Bonus
Individual Bonus
Group Bonus
Bonus Scheme
400
350
1500 @100%
1500 @100%
Based on Individual performance
Will be paid only if the group is earning bonus
No limits to earnings
Promotes Self motivation
Example
Group Bonus @ 100% Rs.1500
Payment start level
50%
Approx. Rs.30 for every 1% increase in
group efficiency.
All operators are allocated to groups.
A Groups can be subsections or Line
Group must achieve the start level efficiency
Bonus are paid on the collective efficiency of the group
Peer pressure will create group loyalty
Efficiency Bonus
To be paid Only if the
group reaches the set
level
Establish the
incentive to be paid @100%
Decide the share of
individual and Group
bonus
Individual Bonus @
100% Rs.1500
Payment start level 50%
No bonus if group efficiency < 50%
Approx. Rs.30 for every 1%
increase in individual efficiency
Example
Attendance Bonus
Jump Start Bonus
Individual Bonus
Group Bonus
Objective of each Bonus
• Reduces Absenteeism• Motivates to come on time
• Make it easy to achieve• Once achieved instills confidence in bonus
system
• Boosts individual efficiency
• Boosts group efficiency• Builds team spirit
Operators come to work each day on time and earn Rs. 400
Attendance Bonus
Jump Start Bonus
Individual Bonus
Group Bonus
What can the operator get?
1500 @100%
1500 @100%
Reach just 50% efficiency and earn Rs. 350
400
350
900 @80%
900 @80%
Operators take home Rs. 2550
This is achievable
There is no limit…☺
80% efficiency is achievable Earn Rs. 900
80% efficiency is achievable earn Rs. 900
0 10 20 30 40 50 60 70 80 90 1004000
5000
6000
7000
8000
9000
10000
6350
6950
7550
8150
8750
9350
Bonus SchemeBased on Rs 6, 000 basic
No Bonus paid below 50% Jumpstart paid at 50%Bonus increases with efficiency
Attendance Bonus
Jump Start Bonus
Individual Bonus
Group Bonus
Some important points
1. Bonus is paid for total hours work including
overtime
Win-Win Situation
• More Capacity• Less Absenteeism• No work no bonus• Reduced cost/piece• Improved Quality• Higher Production• Happy Owners.• More Money
• More Efficiency• Higher Motivation• More work more bonus• Increased earnings• Fewer Repairs• Higher Output• Happy Employees• More Money
Company Operators
Who Earns Bonus?Everyone can earn more.• Operators • Line Helpers• Other Helpers• Supervisors• IE’S• QCs
&THE COMPANY
People who do not have tickets (Supervisors, helpers, QC)
Their earning is dependent upon the performance of the group they work for.
If group achieves high efficiency they earn more.
Important Information
Start on a 3 month
trial
Explain benefits
to operators
Highlight best
operators
Encourage low
efficiency operators
No bonus for off-
standard time
Benefits of Bonus to the Company
• Average Salary Rs. 6000• Operators 200• Present Efficiency 40%• Present Production 40000/month• Overhead 150%• Absenteeism 10%
35% 40% 45% 50% 55% 60% 65% 70% 75% 80%0
1000000
2000000
3000000
4000000
5000000
6000000
Salary Overhead BonusTotal Cost Profits
Basic Salaries remain the sameOverheads remain the sameBonus increases with efficiencyOperators earn moreThe company earns Much MORE!!
Bonus Scheme increases efficiencyEverybody Wins!!
Bonus System
The Key to future increased
Profitability
Basic rules of the scheme
• No individual bonus unless the group is earning
Bonus
• Define a start level for the Bonus earnings
• The start level – At this level the company must
cover all the overheads and should make a certain
amount of profit.
• Jump start amount in terms of overtime hours • Jump start bonus amount = 14 hrs of overtime
pay• If you were