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Labor Performance offers a comprehensive and fully customizable pay-for-performance system. Why incentivize? Most sales organizations compensate sales staff based on some sort of incentive structure for revenue creation. Why not do the same for employees and reward them for cost reduction? After all, a dollar in cost savings is worth far more than a dollar in new revenue. (Assume a company profits 10% on sales. $1.00 saved is equivalent to $10.00 in revenue.)
The Labor Performance incentive methodology does not pay out any incentive bonuses unless substantial value is created by the employees. Once the direct labor cost for a service or item is established, it can be used as a baseline model on which to build an incentive program.
As an example, let's assume your organization can produce 100 widgets per labor hour at a loaded direct labor cost of $20 per hour. Therefore, each widget costs 20 cents of labor to produce. If an employee can produce 200 widgets in one labor hour, then that labor cost has been reduced to 10 cents per unit, and that employee created $10 of extra value through improved performance during that one hour. The employee then receives a bonus as a percentage of the total savings (usually 20% to 50%). Unless there are direct cost savings, there are no bonuses. All bonuses are paid out from proven and measurable cost savings.
Labor Performance allows you to measure, report, and incentivize based on the value created, and you
can customize exactly how those bonuses are calculated and paid out.
The performance incentives result in employees that focus on their work in alignment with the goals of the company, and their motivation to produce reaches an optimal level.
One criticism of production incentives is that quality suffers. Labor Performance incorporates comprehensive quality tracking and reporting metrics which can be configured into your company's incentive plan. Supervisors can also receive bonuses based on the quality performance of their work group and their management of indirect labor costs.
Labor Performance's team of experts can work with you, if desired, to design the optimal incentive program for your company's objectives.
No incentives are paid until actual, measured labor costs go down. Incentives are structured as a percentage of cost savings that individual employees are able to create.
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