The most suitable incentive scheme for Apparel manufacturing industries

2. What Really Motivates
People at WORK!!

3. Is it
Money
Is it
Recognition
Is it Job
Satisfaction
Is it
Position

4. Historical system- Piecework
People are
Piecework
Highly
No
Cost effective
Virtually no
has been
Motivated
systems…
obligations
supervision
there for
and for No
skillful
Noneeded
work,
is
years and
under
employees
employer,
years
piecework

5. Piecework Systems- 3 types
Make through – One person
makes the whole garment
Batch System -Group of
operators working together
Line system- Every
operation has a rate

6. Compare
20
Lower
Up to 46% Higher
Cost Per pc depends on
25
Piece Rate
Labour Rate per piece
30
Salary
salary system
Work Content
piece rate
Market Rate
Quality Cost depends on
Quantity
Operators focus on
Cost depends on SAM
Present labour demand
Attrition Rate
Lower
Higher
15
10
Quantity can be forced by
5
incentive Scheme
More production more money. Quality is
not mandatory
0
polo shirt polo shirt - round neck fleece pant Men's Brief Ladies Hood Shirt
LS
T shirt
Short Tank
Pillow
cover
Fitted
Sheet
Flat Sheet
Pillow
cover
Quilt cover
Studies show labour rate is higher in piece rate systemmove wherever the pay is
They
They stay with the company
higher

7. Compare
Salary
Piece Rate
Labour Rate per piece
Lower
Up to 46% Higher
Work Content
Market Rate
Fixed
Varies with labour
availability
No problem
Price negotiation
Welcome
Resisted
Cost Per pc depends on
Operators focus on
Attrition Will reduce work
Rate
Capacity
Product Change
Fixed number of employees
in the company
Advanced Technology
They stay with the company
Work study and Will help them work
Method Improvement
Company can hire and fire as they
want.
Quality
Quantity
Labour may not be available when
needed.
Will reduce earning
Lower
Higher
They move wherever the pay is
Will reduce earning opportunity and
higher
Welcome
Resisted
piece rate

8. Compare
Salary
Piece Rate
Labour Rate per piece
Lower
46% Higher
Cost Per pc depends on
Work Content
Market Rate
Operators focus on
Quality
Quantity
Attrition Will reduce work
Rate
Lower
Will reduce earning
Higher
Capacity
Fixed
Varies with labour
availability
Product Change
No problem
Price negotiation
Advanced Technology
Welcome
Resisted
Work study and Method Improvement
Welcome
Resisted

9. Challenges of Piece work system
To decide a fair rate
is most critical step
Most factories do not
have the systems to
establish proper
methods and Standard
times
Until rate is settled
there is huge loss of
productivity
Hence the Rate is
decided by a mutual
negotiation

10. Things are changing
Number of
Pieceworkers are
reducing
Industry is
expanding
For a complaint
factory disciplined
labour is a MUST!!
Margins are very
tight
Pieceworkers earn
less annually, hence
“Piece work earns
more” is a myth..

11. Incentives Adds benefits of piece rate to
The solution
Salary System
Company
• Focus on Quantity
• Capacity increases with efficiency
• Less cost incurred
Operators
• Option to earn more money
• No price negotiation problem
• Less Troubles

12. Convert from Push to Pull
•
•
•
•
•
•
Easy for Managers
Easy for the Supervisors
Quality will improve
Motivated workforce
Downtime will reduce
Operators will demand better services:
–
–
–
–
Supply of work
Better Planning
Line Balancing
Mechanic’s service
Quality ?

13. Pre-requisites of a structured Incentive
Scheme
The company Must Establish best methods and fair standard times
Fool proof tracking of operator performances
Easy to understand, Must be fair to all
Mutual agreement required
No limits to earnings
Supervisors , IE’s and indirect Must be included
The carrot should be worthwhile going for..
WIP Progress levels must be controlled

14. Few Suggestions for a suitable
Incentive scheme

15. Attendance Bonus
400
Jump Start Bonus
350
Individual Bonus
Group Bonus
Example:
Based on attended days
•Quick pace builder and motivator
Attendance Bonus
Rs.400
Rules of deduction to be made for
Example day absent
•Start •One :Must be achievable
level
No•2 day absent
absent
400
1 day absent
•Everyone achieving Rs.300
•3 Start Bonus
Jump days or more this level is eligible
350
2 days absent
150
3 days establish
0
•Helps to or more trust between
Efficiency Start level = 50%
management and workers
Must achieve monthly average
of 50% to earn Rs. 350

16. Bonus Scheme
Attendance Bonus
400
Jump Start Bonus
350
Individual Bonus
1500 @100%
Group Bonus
1500 @100%
All operators are allocated to groups.
Based
Individual Bonus on Individual performance
Payment start
A@ 100% Rs.1500
Groups can be subsections or Line 50%
level
Will be paid only if the group is
Efficiency Bonus
Example
earning bonus
Group must achieve the start level efficiency
No limits to earningsRs.30
Approx.
To be paid
Establish for every 1%
Decide the
Example efficiency of
Group Bonus onPayment
Only if the the collective
Bonus are paid
the
share of
Promotes
motivation
the group
@ 100%
start level Selfincrease in
group
incentive individual
group
Rs.1500
50%
reaches
to be group loyalty Group
paid and
Peer the set will create Approx. Rs.30 for
pressure
efficiency.
@100%
bonus
No bonus if group
every 1% increase
level
in individual
efficiency < 50%
efficiency

17. Objective of each Bonus
Attendance Bonus
• Reduces Absenteeism
• Motivates to come on time
Jump Start Bonus
• Make it easy to achieve
• Once achieved instills confidence in bonus
system
Individual Bonus
• Boosts individual efficiency
Group Bonus
• Boosts group efficiency
• Builds team spirit

18. What can the operator get?
Attendance Bonus
400
Operators take home Rs. 2550
Jump Start Bonus
Individual Bonus
1500 @100%
Group Bonus
1500 @100%
This is achievable
Operators come to work each day on time and
350
earn Rs. 400
There is no limit…
Reach just 50% efficiency and earn Rs. 350
900 @80%
80% efficiency is achievable
Earn Rs. 900
80% efficiency is achievable earn Rs. 900
900 @80%

19. Bonus Scheme
Based on Rs 6, 000 basic
10000
9350
9000
Bonus increasesat 50% 50%
with
Jumpstart paid belowefficiency
No Bonus
8750
8000
8150
7550
7000
6950
6350
6000
5000
4000
0
10
20
30
40
50
60
70
80
90
100

20. Some important points
Attendance Bonus
1.
Jump Start Bonus
Individual Bonus
Group Bonus
Bonus is paid for total hours work including
overtime

21. Win-Win Situation
Company
•
•
•
•
•
•
•
•
More Capacity
Less Absenteeism
No work no bonus
Reduced cost/piece
Improved Quality
Higher Production
Happy Owners.
More Money
Operators
•
•
•
•
•
•
•
•
More Efficiency
Higher Motivation
More work more bonus
Increased earnings
Fewer Repairs
Higher Output
Happy Employees
More Money

22. Who Earns Bonus?
Everyone can earn more.
• Operators
• Line Helpers
• Other Helpers
• Supervisors
• IE’S
• QCs
&
THE COMPANY

23. People who do not have tickets
(Supervisors, helpers, QC)
Their earning is dependent upon the performance
of the group they work for.
If group achieves high efficiency they earn more.

24. Important Information
Explain
benefits
to
operators
Highlight
best
operators
Start on a
3 month
trial
Encourage
low
efficiency
operators
No bonus
for offstandard
time

25. Benefits of Bonus to the Company
•
•
•
•
•
•
Average Salary
Operators
Present Efficiency
Present Production
Overhead
Absenteeism
Rs. 6000
200
40%
40000/month
150%
10%

26. Bonus Scheme increases efficiency
Basic Salaries remainthe same
remain more
Operators earn the same
Bonus increases with efficiency
Overheads earns Much MORE!!
The company
Everybody Wins!!
6000000
5000000
4000000
3000000
2000000
1000000
0
35%
40%
Salary
45%
50%
Overhead
55%
Bonus
60%
65%
Total Cost
70%
75%
Profits
80%

27. Bonus System
The Key to future
increased
Profitability

28. Basic rules of the scheme
• No individual bonus unless the group is earning
Bonus
• Define a start level for the Bonus earnings
• The start level – At this level the company must
cover all the overheads and should make a certain
amount of profit.

29. • Jump start amount in terms of overtime hours
• Jump start bonus amount = 14 hrs of overtime
pay
• If you were