Is a form of output-based incentive which operates at company or workplace level. There are a variety of forms, including the Scanlon and Rucker Plans and Improshare, but common to most is an attempt to link payment to a measure of value-added. Value-added is calculated by deducting labour costs and expenditure on raw materials, energy and support services from the income derived from the sale of the finished product. If value-added increases above a target figure, then it is shared between workforce and company in accordance with a pre-set formula, which in most cases allocates between 40 and 50 per cent to the employees. The aim is to produce a group incentive which, unlike profit-sharing, more directly reflects the contribution of the workforce to business performance. Another significant feature of gain-sharing is that the reward element frequently operates alongside procedures for communication and involvement. Managers provide continual feedback on the achievement of value-added targets whilst employees provide recommendations for improving performance through suggestion schemes and small group activities. Two other noteworthy features of gain-sharing plans have been highlighted by researchers in the United States. First, their use is associated with the presence of trade unions and union voice may play an important part in establishing the strong element of reciprocity characteristic of these schemes. Second, and perhaps related, gain-sharing is associated with high levels of company performance and, although it is a system of payment found most often in traditional manufacturing, appears to be relatively effective.
Subjects: Human Resource Management.