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Percentage Info
How Sliding Scales No Caps Affects Gainshare Employee Productivity
When a job can be measured using individual gainshare employee productivity standards, tell the employee that if they average 10% above normal productivity levels for one month, then the next month you will add 25 cents to their hourly wage for the next month’s pay. To continue, tell them if they average 15% above then you will add 50 cents to their hourly rate for the following month. Or 75 cents for a 20% increase in average employee productivity. The best thing is that there are no caps, so the more above they want to work, the more they will get paid. That’s a BIG incentive for almost any worker.
But where do your profits materialize? You’re paying the gainshare employees more, so how does this percentage out for you. Let’s take a look. A Simplified Gainshare employee productivity program utilizes a one-third/two-thirds split. For the sake of easy math, we’ll look at a $10 an hour employee. At 10% above standard productivity performance, they’re worth $11.00 to you. If your benefits average 30% of labor costs, a 10% employee productivity gain is really worth $11.30 to the company. So for the $1.30 increase on the first 10% gain, you’ll pay the employee 25 cents, and the company profits $1.05. The employee gets 19.2% of the gain and the company gets 80.8%.
For the next gainshare level, at 15% above standard employee productivity, you pay 50 cents per hour more than the regular wage. The savings is $1.95 and the company makes $1.45 as a result. The employee ends up with 25.6% of the gain and the company gets 74.4%.
One additional point to appreciate is that when using a stepped scale such as this employee productivity gainshare plan, each benefit increase is only paid when the next full step is met. All value between the steps accrues to the company at no extra cost. In other words, if an employee increases their productivity only 14% rather than the 15% needed to obtain the next gainshare level, the company only pays for the productivity at the 10% level.
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