Manag., November-2017 – Q14
- Option : A
- Explanation : Gain Sharing: A gain sharing plan aims at increasing productivity or decreasing labour costs and sharing the resultant gains (usually a
lump sum payment) with employees. It is based on a mathematical formula that compares a baseline of performance with actual productivity during a given period. When productivity exceeds the baseline an agreedupon savings is shared with employees. Gainsharing is built around the idea that involved employees will improve productivity through
more effective use of organisational resources. Three major types of gainsharing plans are currently in use: Scanlon Plan, Rucker Plan, and Improshare Plan.
> Scanlon Plan: The Scanlon Plan was the first to connect employee involvement and employee-generated gains with pay. The Scanlon formula measures employment costs as a proportion of total sales. A standard ratio of employment cost/sales, say 40 per cent, is determined and, if labour costs fall below this proportion, the savings are distributed between employees and the company on the basis of a pre-established sharing formula.
> Rucker Plan: The Rucker Plan, like the Scanlon Plan, is based on employment costs, but they are calculated as a proportion of sales less the costs of materials and supplies (i.e., value-added). Allen Rucker contended that the pay proportion of value-added remains a nearconstant share unless the organization suffers from severe mismanagement or a drastic change of policy. On the basis of this assumption, the Rucker Plan determines a constant share of whatever added value is created by the joint efforts of management and employees. Unlike the Scanlon Plan, Rucker offers only a formula, with little attention to improvement means to generate gains.
> Improshare Plan: Improshare Plan is a proprietary plan, which is based on an established standard that defines the expected hours required to produce an acceptable level of output. The standard is derived from work measurement. Any savings resulting from an increase in output in fewer than expected hours are shared between the organization and employees by means of a pre-established formula. Like the Rucker Plan, Improshare Plan is only a formula for tracking gains and does not offer a link to employee involvement.
