Best Individual Incentive Scheme For a Manufacturing Industry

Individual Incentive:

Everyone always moves from one place to another for earning money. People wants to earn more to maintain improve life and for the future naturally. If there is any opportunity for earning more money like more salary, more production / incentive bonus etc, undoubtedly operators will jump for it. So need to design a lucrative incentive scheme and it will drive the people to work hard. And company will get more production with the same working hour. Incentive is the best motivator to increase performance. 

Incentive Scheme: Part # 1

There are two types of incentive scheme mostly used in sweater industry that is -

• Individual Incentive Scheme
• Group Incentive Scheme.

Now questions is which operator and operations we should consider under this Individual Scheme. Operator / operations - should consider under this scheme those have direct impact on line output. 

For example -

At Linking Section: Linkers, Trimmers

At Finishing Section: Ironers, Sewing Operators

And others all will consider under Group Incentive Scheme.

I will share here most used attractive individual incentive scheme. That will be benefited for both operators and company.

1. Individual Incentive Scheme: 

The name define itself that incentive bonus will pay to those operator who are producing more than the target. Peoples will get incentive based on their individual performance. The more an operator achieve than the target, can avail more incentive. If not achieve more than the target, he / she will not eligible for any incentive. And this is the most popular incentive scheme for the operators who are rewarded individually for their additional contribution / performance.

For example,

Operational SMV = 0.9

Incentive will be pay per minute = 0.8 BDT

So amount per extra pcs = (SMV * 0.8) = (0.9*0.8) = 0.72 BDT

Target @ 100% efficiency = 66.67 Pcs

Minimum target @ 70% = 46.67

So those are achieving more than 46.67 pcs hourly will eligible for incentive as below,

Suppose operator A achieve 667 pcs at 100% efficiency end of the day at 10 hours. So he produces (667 - 466.7) = 200.3 pcs extra and will get incentive = (200.3*0.72) = 144.2 BDT.

We can calculate same things with per efficiency achievement like below,

Here, Incentive per Efficiency = (0.8*60) = 0.48 taka hourly and 4.80 taka per day at 10 hours.

From above data-

Operator A achieve (100% - 70 %) = 30% more efficiency than the target.

So he will get incentive = (30*4.80) = 144 BDT

Here is the example in brief,

Set a standard criteria to make it functional. Production recording system must be more authentic and reliable because payment will for every extra pieces/ extra efficiency achievement here. 

Incentive Criteria:

• Up to 69% efficiency - operator will not get any incentive
• From 70% efficiency will eligible for incentive ( extra pcs or extra efficiency )
• And max limit is 100 to 130% ( Based on management decision )
• This is an individual incentive scheme
• Payable incentive amounts will calculate daily basis
• Payment will done as per the management decision which can be weekly, biweekly or monthly.

Advantages of Individual Incentive: 

• Operators work hard here with self-motivation to earn maximum amount of incentive
• Incentive system drive the operators to work hard
• So that produce quantity also increase
• Labor productivity will increase
• Will Increase job satisfaction through extra earnings
• Labor turnover & absenteeism will decrease
• Delivery lead time will decrease as well.

Disadvantage of Individual Incentive:

• Some operators will get less incentive because of their low efficiency
• Don't want to learn new process / skills if takes more time to learn
• Team bonding may poor
• Line may imbalanced due to some of the operators higher capacity and it may create bottle neck in line
• Sometimes wrong incentive amount may be pay in case of unrealistic production data.

Conclusion:

Minimum and maximum target level may vary factory wise as per management decision. Minimum targeted efficiency level is 55% to 70% and maximum target level is 130%. So operators always try to make their time productive, even in their break time also for earning more money.

Read Also: How to Motivate Garments Worker in a Production Floor?