How does Gainsharing work? A Company shares productivity gains with the workforce. Workers voluntarily participate in management to accept responsibility for major reforms. This type of pay is based on factors directly under a worker’s control (i.e., productivity or costs). Gains are measured and distributions are made frequently through a predetermined formula. Because this pay is only implemented when gains are achieved, gainsharing plans do not adversely affect company costs.

What are the 'Gains' that are measured?

• Increases in production with equal or less effort.
• Equal levels of production with less effort.

What are examples of Gainsharing formulas?

• Calculate gain in hours: The actual hours worked minus the expected hours (for the given level of output) equals the gain in hours.

Advantages Helps companies achieve sustained increases in productivity. Employees become more involved the productivity gains made by the employer. Employees can share in the benefits of employee sponsored improvements. Enhances commitment to organizational goals. Leads to improvements in other measures of company performance, including: teamwork, product quality, lower rates of absenteeism, defects, and "downtime."

Disadvantages Adherence to the FLSA requires employers to recalculate each worker's "regular rate" of pay. To overcome this limitation, employers may restrict this type of compensation to exempt employees. The formulas and program may be difficult to understand. Requires a shift to a more team oriented management style.

Tips When does Gainsharing work best? Works best when company performance levels can be easily quantified. Employee involvement significantly enhances the effectiveness of incentive pay. When used simultaneously, productivity gains from combining these techniques can exceed gains achieved separately. What is the best way to implement Gainsharing? Meet with executives to develop a clear understanding of Gainsharing. Develop various formulas and models to be used in predicting future gains and the costs associated with sharing those gains. Prepare rules, presentation materials, and dissemination of policy. Retrain supervisors and administrators. Teams of employees are selected by peers to develop cost-saving measures. Through their personal knowledge about their jobs, employees are able to reduce waste and increase efficiency. Website URL's: http://epf.org/t980716.htm http://www.silverstoneconsulting.com/consult/projecon/compsys/gainshar.htm http://www.qualitydigest.com/jul/gainshre.html