Transcript Incentives - Portal Rasmi PLWS

MOHD SHARIFFUDIN BIN PADZIL
PEN PENGARAH KANAN,
UNIT PROMOSI DAN PUBLISITI PLWS
JABATAN PERHUBUNGAN
PERUSAHAAN
PUTRAJAYA
[email protected]
CONTENTS
Concept High Income Economy
Concept Productivity
Productivity Linked Wages System
Examples Model of PLWS
HIGH INCOME ECONOMY
Income per capita
usd 15k – 20k
2020
PRODUCTIVITY GROWTH MUST
BE AT LEAST 4.5% - 6 % PER
ANNUM CONSISTENTLY
2014
Malaysia’ Productivity And GDP Growth
New Economic Model (NEM)
♦ Creating a high income nation will mean higher wages
throughout the economy.
♦ Allow wage level to be reflective of the skill level
High
Income
Economy
♦ Raise wage through productivity gains.
♦ Protect workers through stronger safety net while
encouraging labour market flexibility
♦ Encourage higher productivity activities and pave the
way for more robust future increase in wages
CONCEPT PRODUCTIVITY
• Productivity is the ability to produce output from a given set of inputs ~
measures the efficiency and effectiveness of resource utilizations such as
employees, technology, system and management etc., in converting inputs
into useful outputs.
• Mathematically,
PRODUCTIVITY = OUTPUT
INPUT
Output
End-product of the process which can either
be the finished goods or the services
rendered.
 Gross Domestic Product (GDP)
 Total Output
 Added Value
 Monetary Value of Production
 Quantity of physical unit produced
Input
The amount of resources that are utilise in
producing the goods or in providing the
services.
 Employees
 Total man-hours worked
 Labor cost
 Capital/Fixed assets
 Energy
 Material
 Services
PRODUCTIVITY LINKED WAGE SYSTEM
IN MALAYSIA
Malaysia’s Policies on Linking Wages To Productivity
Guidelines on Wage Reform Was
Established in August 1996.
Establish a closer link between wages
and productivity
Develop a wider and systematic approach
towards improving productivity and
wages
Ensure active involvement and
cooperation of employees to develop
PLWS
Ensure that employees obtain a fair share
of gains from productivity growth and
performance improvements
PRODUCTIVITY LINKED WAGE SYSTEM
PLWS is a wage system which establishes a link
between wages and productivity/performance.
PLWS ensure any increase in wages
commensurate with increase in
productivity/performance
PLWS enables employees to obtain a fair share of
gains that arise from productivity growth and
performance improvements.
PLWS in Malaysia
INDUSTRIAL RELATIONS DEPARTMENT (IRD)
PROMOTE PLWS
As of APRIL 2014
76,858
employers
implemented
PLWS
BENEFITING
3,104,038 employees
throughout Malaysia
Key Players in PLWS

Employer – the main player that will initiate the
implementation of PLWS at company level.

Employee (unionised or non-unionised) – is the main
catalyst that will ensure that the KPIs set under the PLWS
are achieved.

Government – assists companies in developing the system
and negotiation process.
Linking wages to productivity makes the
following possible:
a) Higher wages for worker and higher
profits for companies.
b) Greater competitiveness for companies.
Wages
Profits
Output
Wages
Profits
Output
2 BASIC COMPONENTS OF PLWS
FIXED
COMPONENT
• Basic salary
• Annual Increment
• Bonus Contractual (
if any )
There must always be the Fixed and the
Variable component in the PLWS
VARIABLE
COMPONENT
• Wage increase for
the year is based
on a productivity or
• profit sharing
formula
ELEMENTS PLWS
NON
CONTRACTUAL
BONUS
INCREMENT
BASE ON
PERFORMANCE
SERVICE
CHARGES
PIECE RATE
SYSTEM
INDIVIDUAL
ACHIEVEMENT
ATTENDANCE
ALLOWANCE
TRIP
INCENTIVE
SALES
INCENTIVE
COACHING /
TEACHING
ALLOWANCE
MODEL PLWS
3 BASIC
MODELS
COMBINED
MODEL
PRODUCTIVITY
MODEL
PROFITABILITY
MODEL
PRODUCTIVITY MODEL
FIXED COMPONENT
Basic Wage &
Annual Increment
VARIABLE COMPONENT
A variable productivity payment to be determined.
T= A+P
Where
T = total wage increase
A = annual increment
P = variable productivity payment
Example Productivity model
•
Year 1
•
If Basic wage = RM1000 per month, A = 2% and P = 3%,
•
Basic wage + A = RM1,000 + 2% (RM1,000) = RM1,020 (built into
basic wage).
•
•
P = 3% x RM1000 x 12 months = RM360 per annum
Year 2:
•
If basic wage = RM1,020; A = 2% and P = 4%
•
Basic Wage + Annual Increment = RM1,020 + 2% (RM1,020) =
RM1,040 per month
•
P = 4% x RM1,020 x 12 months = RM489.60 per annum
•
Annual Variable Payment at end of year 2:
•
P for year 1
RM360.00
•
P for year 2
RM489.60
•
Cumulative for 2 consecutive years
RM849.60
Example Profitability Model
Fixed
component
Variable
component
• Basic Wages
• Annual Increment
• Bonus Contractual (if any)
• bonus to be determined by a profit-sharing
formula and where applicable:• The formula is to be agreed upon between
the management and union and spelt out in
the Collective Agreement or through
consultation for the non-unionised sector
PLWS Model 1:
Profitability Model
#1
• Payment of bonus according to profit
levels based on monthly basic pay.
Profit After Tax
(RM Million)
<1.5 (threshold)
Bonus
[Month(s)Salary]
0
1.5 - 1.99
0.5
2.0 - 2.49
1.0
2.5 - 2.99
1.5
3.0 and above
2.0
PLWS Model 3:
Combine Model
#1
• Payment of bonus according to 2
criteria – Company Performance and
Employee Performance Rating
Operating Profits
(RM Million)
Above 5.00
1.00
1.00
1.25
1.50
1.75
2.00
4.00 – 5.00
0.75
0.75
1.00
1.25
1.50
1.75
3.00 – 4.00
0.5
0.5
0.75
1.00
1.25
1.50
2.00 – 3.00
0.25
0.25
0.5
0.75
1.00
1.25
Below 1.00
0
0
0.25
0.5
0.75
1.00
<40
40 - 49
50 - 59
60 - 69
70 - 79
>80
Employee Performance
Rating (%)
Variable Productivity payment (Months)
Combined Model
#2
Annual Profit
(RM Million)
Months of
Basic wage
Above 1.49
1.00
1.00
1.25
1.50
1.75
2.00
1.00 – 1.49
0.75
0.75
1.00
1.25
1.50
1.75
0.77 – 0.99
0.50
0.50
0.75
1.00
1.25
1.50
0.50 – 0.69
0.25
0.25
0.50
0.75
1.00
1.25
Below 0.50
0.0
0.0
0.25
0.50
0.75
1.00
Productivity
growth
<1
1.0 – 2.49
2.5 – 4.99
5.0 - 7.45
7.5 – 9.99
>10.0
Examples Model PLWS
Example 1
Performance and Productivity
Incentives
Incentives based on performance and productivity
refers to reward system that linked variable pay or
incentives to the performance or productivity of the
employees.
The incentives will vary according to
the achievement of the employees . The firm
implement wages system which comprises fixed
and variable components.
Under the fixed component the company gives
basic pay and minimum annual increment based
on not less than 2/3 or 60 % of 3 years CPI average.
The increment will provide element of income
stability and form a small portion of the wage bill
to meet escalating living cost.
The variable components comprises annual
performance increment, annual performance
bonus, monthly productivity payment and
monthly multi skill allowance.
The variable components will determine the total
take home pay and the incentives will be based
on performance and less efficient will receive
lower returns.
Incentive Based on Performance and Productivity
Wage System
Fixed
Components
Basic Pay
Wage
Min.
Annual
Increment
Variable
Components
Profitability
Productivity
Incentives
Combined
Example of profitability Incentives
The bonus will be paid when the company makes certain amount
of profit that falls within a predetermined range.
Table Profitability Incentives
Profits After Tax
(RM Million)
Monthly Payroll Cost Bonus =
Profit After Tax
(RM Million)
Monthly Payroll Cost
Less than 5
5
0
5
5
1month
6
5
1.2 month
7
5
1.4 month
8
5
1.6 month
9
5
1.8 month
10
5
2.0 month
ii) Productivity Incentives
The incentives will based on team and individual performance
against predetermine productivity measurement.
Diagram: Productivity Incentives
Productivity
Based on team and individual performance against
predetermined productivity measurement
• Total output
• Quality output
• Wastages
• Customer Satisfaction
• Individual Performance
Matrix incentives
Matrix incentives will be given based on the profitability and average
performance of division, department and individual as shown below.
Profits
(RM million)
Incentives (Months)
Less 5
0
0.1
0.3
0.5
5- 7
0.1
0.3
0.5
0.7
7-9
0.2
0.5
0.7
1.0
9-11
0.3
0.7
1.0
1.3
11-13
0.4
1.0
1.5
2.0
13-15
0.5
1.5
2.0
3.0
Average
Performanc
e
(%)
Less 70
70 -80
80-90
90-100
If the company performance are as follows:
Division Performance is 85%
Department Performance is 90%
Individual Performance is 85%
Average Performance of an employee is 86.7%
Based on the calculation above the respective employee
will received 2 months bonus if the company makes RM 13
million profits .The incentives taking into consideration
the overall employees performance. In order to received
higher quantum of bonus each employees should
contribute to the division and department performance as
well as their own performance.
EXAMPLE 2
Profitability-linked bonus
Fixed Bonus:
The Company shall pay an annual guaranteed bonus equivalent to
one month of the last drawn basic salary.
Variable Bonus:
Should the company make a profit of:
RM1,500,000/= to RM2,500,000/=, the company shall pay one and a
half (1.5) months of the last drawn basic salary as bonus;
Profits exceeding RM2,500,000/=, bonus payment shall be two (2)
months of the last drawn basic salary.
Notwithstanding the above, the guaranteed bonus of one month,
based on last drawn basic salary, shall continue to be applicable.
EXAMPLE 3
Profit Sharing and Team Incentive
There are two components in this model, the fixed and variable
components.
The Fixed Component comprises:
•Basic Wage
The basic wage comprises the monthly wage which is based on a
salary scale with a minimum and maximum range for each category
of employee.
•Annual Increment
The annual increment is linked to the basic wage and will vary
within the scale of pay assigned to the position.
Variable Component
There are two types of incentives which are linked to
productivity/performance:
• Bonus Based on Profit and Individual Performance
• Team Incentive
Bonus Based on Profit and Individual Performance
• The profit used in this model is Profit Before Tax which will be
distributed to employees based on profit level and
performance. The higher the firm’s profitability, the larger will
be the amount available for sharing.
• Table below shows an example the matrix system of bonus
payment. Based on this matrix, the amount of bonus payment
received by an employee will depend on the profitability of the
firm and employee performance.
Profit
(RM million)
Variable Incentive Bonus (Months)
> 12
0
0.3
0.5
1.0
1.1
2.1
9-12
0
0.2
0.3
0.9
1.0
1.5
6-8.9
0
0.0
0.2
0.8
0.9
1.3
4-5.9
0
0.0
0.1
0.7
0.8
1.1
<4
0
0.0
0.0
0.5
0.6
0.9
Employee
Performance
Rating (%)
<40
40-49 50-59 60-69 70-80
>80
Team Incentive
Performance Criteria
Performance Standard
(Target)
1. Production targets
above 80%
2. Quality output
above 90%
3. Customer complaint Zero complaint
4. Maintenance
No machine breakdown
5. Discipline
No reminder or warning
letter
Team Incentive Payout based on Criteria Achieved
Monthly Incentives
Number of Criteria Achieved
Incentives
5
RM 100
4
RM 80
3
RM 60
2
RM 0
1
RM 0
• If a team of 5 employees are able to achieve all the five
criteria, each team member will receive RM 100 as a
monthly incentive.
• However, if the team achieves only 2 criteria then there
will be no pay out.
EXAMPLE 4
Productivity Targets
In the case of this example, the service organisation gives incentives based on
the productivity targets achieved.
Table below shows an example of planned targets against achievable targets.
Planned Target
Actual Achievements
Incentives (RM)
80%
Above 100%
150
80%
91%-100%
100
80%
80% - 90%
50
80%
Below 80%
0
 Incentives are given to the employees when the actual productivity
achievement is higher than the planned target.
 For example, if the planned target is 80% and the actual achievement is 95%
then the employees will receive RM100.00 for achieving the productivity
targets.
EXAMPLE 5
Bonus Based on Company and Individual
Performance
 The manufacturing
firm in this example shall pay
performance bonus based on the company and the
individual performance.
 The
company
performance
shall be
based
on
achievements against business plan of the year and
employee performance shall be based on the
performance appraisal rating and points awarded in
accordance to their annual appraisal
Bonus Based on Company and Individual Performance
Company Performance
below
85% -
101% -
121% -
Above
Based on Business Plan
85%
100%
120%
140%
140%
Individual Performance
Bonus Payout
Unsatisfactory
below 40%
0
0.1
0.2
0.3
0.4
Average
40% - 54%
0.3
0.4
0.5
0.6
0.7
Good
55% - 69%
0.5
0.7
0.9
1.1
1.3
Very Good
70% -85%
0.7
1.0
1.3
1.6
1.9
Outstanding
above 85%
1.0
1.3
1.6
1.9
2.2
If the company’s performance rating is 100% and individual performance is 75%
which is “very good”, then the quantum of bonus that will be granted to the employee
will be 1.0 month. Therefore, this clearly indicates that whenever both parties i.e.
employees and firm perform very well, there will be higher quantum of bonus
distributed among the employees.
EXAMPLE 7
Debt Incentive Collection
Debt
Collection
Current
30 days
60 days
90 days
<RM100,000
2.0%
1.5%
1.0%
0.5%
RM100,000200,000
1.0%
0.5%
0.25%
0.1%
>RM200,00
0.5%
0.25%
0.1%
0.05%
EXAMPLE 8
Rework Incentives
Incentives will be paid when there is reduction in rework rate.
Planned Rework
10% of the monthly
output
10% of the monthly
output
10% of the monthly
output
10% of the monthly
output
10% of the monthly
output
Actual
Achievements
Incentives
(RM)*
> 11%
0
8%-10%
10.00
5%-7%
15.00
2%-4%
20.00
0-1%
25.00
EXAMPLE 9
MERIT AND PROFIT SHARING SCHEME
The Scheme consist of two components:
(a) Fixed Component which comprises of basic wage
plus an annual increment of 3%of basic salary and an
annual bonus of one month’s basic salary.
(b) Variable Component. Among the tools used to
determine the variable component are profit sharing
and personal performance review (PPR).
EXAMPLE 10
•
Performance Incentives Allowance
The company decided to reward employees which already reach
their maximum salary. Employees who have reached the maximum
on their salary scale and have performed commendably during the
period of review, shall be eligible for a monthly allowance for the
next 12 month. Performance Incentives Allowances shall include
the following category of performance as shown in table below.
Performance Category
Monthly Allowance
Highly Effective
RM 60.00
Competence
RM 40.00
PLWS and its impact
Companies with PLWS
Elements in Collective
Agreements
Impact of PLWS
Implementation
Productivity
Staff Turnover
Absenteeism
Rejects and Reworks
2001 - 2004
2005 - 2008
691
1,566
2006 (%)
2008 (%)
2.64
5.21
8.80
5.33
5.17
2.13
4.17
2.85
ENHANCE PLWS PRACTICES
Improved Productivity and
Competitiveness at the firm level
Job stability and reduces retrenchment
Provide continuous improvement
Benefits
Motivation and job satisfaction
Improves communication and
cooperation
44
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