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Gain sharing plan

Gain sharing is not just an employee involvement program. Gain sharing bonus dimension proves to be the missing link in many employee involvement endeavors that are unsuccessful. Compensation can be linked directly to employee performance. In the absence of this link, the employee involvement process runs the risk of becoming just another program that comes and goes. The bonus opportunity is a matter of equity. This gains importance particularly now that compensation gap between executives and the balance of the workforce expand continuously. However, if gain sharing were strictly a bonus system, many plans would have failed after facing the first economic downturn, when the bonus potential is often limited. During hard times, the employee involvement activities help maintain the focus of working smarter, and keep employees interested in the process.

Gain sharing can be said to be a system of management wherein an agency seeks higher performance levels through the involvement and participation of its people. With every improvement in performance, the employees get a share in the gain financially. Gain sharing is a team approach where all the employees at the operation or site are generally included. Gain sharing organizations typically measure performances and share savings with employees though a predetermined formula. In order to determine the amount of the gain made by the organization, its actual performance is compared to the baseline performance. Employees and the organization need to change to generate a gain since gains are measured in relationship to a historical baseline. The purpose of gain sharing is to enhance the performance of the organization by promoting alignment, awareness, teamwork, involvement and communication.

Operational measures (quality, productivity, service and spending) that improve the “line of site” in terms of what employees do and how they are compensated form the basis of payout. Gains and resulting payouts are self-funded based on savings generated by improved performance.

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