I am looking for an appropriate incentive scheme for workers and supervisors of our manufacturing facility. The key issues are:
The industry under consideration is an engineering industry manufacturing custom-made engineering goods with no specific design or a datum for basing the calculations upon. The quantity, variety, size, and design are all unique for any particular project. The variation in size also will be from a few kg per piece to up to 4 to 5 tons.
Because of the absence of any common baseline, we had been trying various incentive schemes.
1. We have already tried a Piece Rate Incentive Scheme.
a. This scheme did not provide equitable distribution of the incentive earned as all the supporting workmen were alienated.
b. Because of the highly varied take-home, there were divisions between workmen despite seniority differences.
c. Machine maintenance and proper use of equipment were never given a thought.
d. Fatigue-induced absence was very prevalent.
In order to obviate the above-mentioned problems, the incentive scheme was modified as below.
Since it is a product made of steel that is manufactured and the main raw material being steel, we had worked out a scheme which considered the base as the output tonnage of steel per month. With a specific quantity for achieving breakeven, any output quantity more than this figure was considered for incentive on a per-ton basis. This rate of incentive also varies with the increasing output. For example, if the tonnage output is 94 tons, the incentive rate per ton will be around Rs. 2000 per ton, but if the output is 120 tons, then the rate will be around 3500 per ton. Out of this, there are deductions with respect to overtime beyond a certain permissible limit and also for contract labor beyond a certain permissible limit.
Out of the cumulative incentive calculated, 70% was exclusively reserved for production-oriented personnel or personnel who were engaged in the manufacturing activity of the said product. The balance of 30% is spread to the entire workmen of the factory. This was agreed upon by the workers also since there is an equitable distribution of the incentive.
However, the basic problem that has been plaguing the system is that in a project industry, it takes a lead time of around 4 months for output to be dispatched so there is very negligible incentive for the first three months and a very large incentive in the 4th month. This is creating a problem for the laborers as they are unable to forecast any incentive for the month as well as plan or budget their expenditure.
Can anyone suggest a better incentive scheme or a hybrid incentive scheme so that it is mutually advantageous to the workmen as well as the company.
From India, Pondicherry
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The industry under consideration is an engineering industry manufacturing custom-made engineering goods with no specific design or a datum for basing the calculations upon. The quantity, variety, size, and design are all unique for any particular project. The variation in size also will be from a few kg per piece to up to 4 to 5 tons.
Because of the absence of any common baseline, we had been trying various incentive schemes.
1. We have already tried a Piece Rate Incentive Scheme.
a. This scheme did not provide equitable distribution of the incentive earned as all the supporting workmen were alienated.
b. Because of the highly varied take-home, there were divisions between workmen despite seniority differences.
c. Machine maintenance and proper use of equipment were never given a thought.
d. Fatigue-induced absence was very prevalent.
In order to obviate the above-mentioned problems, the incentive scheme was modified as below.
Since it is a product made of steel that is manufactured and the main raw material being steel, we had worked out a scheme which considered the base as the output tonnage of steel per month. With a specific quantity for achieving breakeven, any output quantity more than this figure was considered for incentive on a per-ton basis. This rate of incentive also varies with the increasing output. For example, if the tonnage output is 94 tons, the incentive rate per ton will be around Rs. 2000 per ton, but if the output is 120 tons, then the rate will be around 3500 per ton. Out of this, there are deductions with respect to overtime beyond a certain permissible limit and also for contract labor beyond a certain permissible limit.
Out of the cumulative incentive calculated, 70% was exclusively reserved for production-oriented personnel or personnel who were engaged in the manufacturing activity of the said product. The balance of 30% is spread to the entire workmen of the factory. This was agreed upon by the workers also since there is an equitable distribution of the incentive.
However, the basic problem that has been plaguing the system is that in a project industry, it takes a lead time of around 4 months for output to be dispatched so there is very negligible incentive for the first three months and a very large incentive in the 4th month. This is creating a problem for the laborers as they are unable to forecast any incentive for the month as well as plan or budget their expenditure.
Can anyone suggest a better incentive scheme or a hybrid incentive scheme so that it is mutually advantageous to the workmen as well as the company.
From India, Pondicherry
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I have been working in advisory for many years now. First of all, though you have provided information, it is difficult to make any suggestions offhand without understanding your current appraisal model and your company's strategic model.
Secondly, the issue of lead time. Instead of giving the entire amount at one go every four months, why not average it? This way, everyone will receive a monthly incentive. Remember to provide the incentive with interest, i.e., at the bank rate. This way, everyone will receive their incentives monthly, and there will be no question of lead time.
For any further clarifications, you can contact me via email at wagle.sonali@gmail.com.
Regards, Sonali
From India, Thana
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5Secondly, the issue of lead time. Instead of giving the entire amount at one go every four months, why not average it? This way, everyone will receive a monthly incentive. Remember to provide the incentive with interest, i.e., at the bank rate. This way, everyone will receive their incentives monthly, and there will be no question of lead time.
For any further clarifications, you can contact me via email at wagle.sonali@gmail.com.
Regards, Sonali
From India, Thana
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Given the paucity of details, suggestions made by Sonali seem sound. I recall the way the cost of living index was calculated in the late 70s in the UK when the inflation rate was accelerating. The company I worked for paid an increase based on the rise in the index every quarter. Similarly, instead of paying everything in the fourth month, you could agree with the unions to pay the same percentage every month based on the previous quarter's performance.
Have a nice day.
Simhan
From United Kingdom
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Have a nice day.
Simhan
From United Kingdom
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Hi all,
I work for a manufacturing company in Andhra Pradesh in a non-metro area. Now, I have to design a salary structure for worker-level employees. Please suggest to me which concept is better to implement - Gross salary concept or CTC concept? Also, provide guidance on which salary components we should collect the bills for.
Thanks,
Jagadish
9951341456
From India, Nalgonda
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I work for a manufacturing company in Andhra Pradesh in a non-metro area. Now, I have to design a salary structure for worker-level employees. Please suggest to me which concept is better to implement - Gross salary concept or CTC concept? Also, provide guidance on which salary components we should collect the bills for.
Thanks,
Jagadish
9951341456
From India, Nalgonda
Acknowledge(0)Amend(0)
Hi all,
I work for a manufacturing company in Andhra Pradesh in a non-metro area. Currently, I need to design a salary structure for worker-level employees. Could you please suggest which concept is better to implement - the Gross salary concept or the CTC concept? Additionally, please advise on which salary components we should collect bills for.
Thanks,
Jagadish
9951341456
jagadishtadivaka@gmail.com
From India, Nalgonda
Acknowledge(0)Amend(0)
I work for a manufacturing company in Andhra Pradesh in a non-metro area. Currently, I need to design a salary structure for worker-level employees. Could you please suggest which concept is better to implement - the Gross salary concept or the CTC concept? Additionally, please advise on which salary components we should collect bills for.
Thanks,
Jagadish
9951341456
jagadishtadivaka@gmail.com
From India, Nalgonda
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