Concept of Gain-sharing

Gain sharing are a formula-based company or factory wide bonus plan, which provides for employees to share in the financial gains made by a company as a result of its improved performance.

The formula determines the share by reference to a performance indicator such as added value or another measure of productivity. In some schemes, the formula also incorporates performance measure relating to quality, customer service, and delivery or cost reduction.

Gain sharing differs from profit sharing in that the latter is based on more than improved productivity. A number of factors outside the individual employees control, such as depreciation procedure, bad debt expenses, taxation and economic changes, contribute to profit. Gain sharing aims to relate its payouts more specifically to productivity and performance improvements within the control of employees. Fundamentally the aim of gain saying is to improve organizational performance by creating a motivated and committed work force who wants to be part of a successful company.

More specifically, the aims of gain sharing are to: Establish and communicate clear performance and productivity targets. Encourage more objective and effective means of measuring organizational or factory performance.

Increase focus on performance improvements in the area of productions, quality, costumes service, delivery and costs.

Encourage employees to participate with managements in the improvement of operating methods.

Share a significant proportion of performance gain with the employees who have collectively contributed to improvements.

Main features of gain sharing are as following:
  1. Ownership: The success of a gain sharing plan depends on creating a feeling of ownership that first applies to the plan and then extends to the operation. 
  2. Involvement: The involvement aspect of gain sharing means that the information generated on company results is used as basis for giving employees the opportunity to make suggestions on ways to improve performance and by empowering them to wake decisions concerning this implication.
  3. Communications: Gain sharing plans all always based on key performance measures such as added value. The company has therefore to ensure that everyone involved knows exactly what are happening in these performances areas. Why it is happening and what can be done about it.
  4. Formula: The traditional forms of gain sharing are the station plan (measures employment costs as a proportion of total sales) the Ruckus plan (similar but a proportion of sales use the costs of materials and supplies) and impression can establish standard). There all however may variations on these plans based on added value and other performance measure. There is no such thing as a standard formula - there is annoys plenty of choice.
Benefits of Gain Sharing:
The potential benefits of gain sharing are that it:
  • Forces the attention all employee on the key issues affecting performance. 
  • Enlists the support of all employees to proposals poor improving performance, not just a selected group.
  • Supports programmes for empowering employees – decision taking can be pushed down the organization hierarchy and employees can be given more control over their work.
  • Engage team work and cooperation’s at all levels.
  • Promoter better today communication about issues concerning work and productivity.
  • Encourages trust between employees and the company.
  • Creates a win: win environment in which everyone gains as productivity rises. 

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