GreenSearch Paying: How Smart Is Your Pay Plan Working For You?

Many companies are turning their attention to wages paid to hourly employees now that Congress is debating and discussing raising the minimum wage again. People who have been through this process before know that a raise in the minimum wage for some employees can have a "compression effect" on those employees who have more seniority and have greater levels of skills and whose wage levels are well above the prevailing minimum wage scale. Do you give them something also in order to maintain that wage differential between what they are currently earning and what the minimum wage earners will receive after a ninety cents an hour wage increase? It's a tough one to call. How do you handle that higher paid employee in whom you have invested time and money for training and development when he or she comes to you for a wage increase that you can't afford to pay?

Would you be more willing to grant an increase or a bonus to that employee if you were able to see a direct relationship between increases in productivity, reduction in expenses, and increased sales and his or her efforts? Would it pique your company's interest if I told you that these increases could be variable and they wouldn't result in additional labor costs to the company? Would you read on if I told you that programs like this, when properly designed and implemented, focus employees' efforts on key results of the business in ways no traditional pay plan could ever achieve?

Surprisingly, a pay program that can and has achieved these kinds of results does exist. It's called Gainsharing. This idea has enjoyed a great deal of success in the manufacturing industry over the past few years, but its design and applications are enjoying broader acceptance by other types of businesses as well. More and more companies are looking for alternatives to the traditional hourly pay plans that continue to increase base labor costs without necessarily improving the results of the business. Here are some of the key differences between Gainsharing and the traditional pay plans for hourly employees all of us know so well.

GAINSHARING

• Encourages teamwork and group results



• Payouts are determined by agreed upon formulas and business results



• Plan funds itself; no incremental costs

TRADITIONAL PLAN

Mostly rewards individual efforts

Payouts tend to be subjectively determined and not always inked to business results

Increases are added to base pay

Gainsharing plans flourish in a company whose style and culture foster a cooperative working spirit among managers and employees. It's the ideal way to link people closely to a shared view of the success of the business and the role everyone can and should play in it. Its also a great way to communicate the realities of the work and attention a successful business requires from everyone who has a stake in it.

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