PRODUCTIVITY-LINKED WAGE SYSTEM (PLWS) COLLOQUIUM AND STRAIGHT TALK Sugumar Saminathan14 April 2015...
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Transcript of PRODUCTIVITY-LINKED WAGE SYSTEM (PLWS) COLLOQUIUM AND STRAIGHT TALK Sugumar Saminathan14 April 2015...
PRODUCTIVITY-LINKED WAGE SYSTEM(PLWS) COLLOQUIUM AND STRAIGHT
TALK
Sugumar Saminathan 14 April 2015 (Tuesday) Manager, Grand Bluewave HotelMalaysia Productivity Corporation, Shah Alam Tel: +603-79557266 ext 544,DL: +603-79562566, Mobile:+6019-6354078E-mail:[email protected] Website:http//www.mpc.gov.myMinistry of International Trade and Industry (MITI)
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PRODUCTIVITI
BUSINESSMAN:“Productivity is
reducing cost and increase profits.”
WORKFORCE:
“Productivity
means getting
higher wages,
benefits and
better working
conditions and
environment.”
CONSUMER:“Productivity bring good
quality products and services at cheaper
prices and higher living standards.”
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WHAT IS PRODUCTIVITY?
Productivity =
Output
Input
Output : Goods & Services
Input : Resources Used
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5 WAYS OF IMPROVING PRODUCTIVITY?
5 Ways Firm Approach
O
I
O
I
O
I
O
I
O
I
Reduce Cost
Manage Growth
Work Effectively
Work Smarter
Pare Down
Productivity is a measure of efficiency in the use of inputs or
resources in relation to its outputs
Output
●Gross Domestic Product (GDP),● Total Output, ● Added Value,● Monetary Value of Production,● Quantity of physical unit produced
Output
●Gross Domestic Product (GDP),● Total Output, ● Added Value,● Monetary Value of Production,● Quantity of physical unit produced
Input
● Employees,● Total man-hours worked● Labour cost, ● Capital/Fixed assets, ● Energy, ● Material, ● Services
Input
● Employees,● Total man-hours worked● Labour cost, ● Capital/Fixed assets, ● Energy, ● Material, ● Services
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PRODUCTIVITY : WEALTH CREATION AND SHARING
Baking & sharing a bigger economic cake
PRODUCTIVITY -LINKED WAGE SYSTEM
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Why Do We Need To Restructure Our Wages?
• A flexible and competitive wage system will enable companies to make quick adjustment to wages that will ensure job stability and reduces the likelihood of retrenchment in the event of an economic slowdown.
Productivity-Linked Wage System
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PRODUCTIVITY- LINKED WAGE SYSTEM (PLWS)
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Malaysia’s Policies on Linking Wages To Productivity
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PHASE 1Creating Conducive Environment
PHASE 2Establishing PLWS System
PHASE 3Implementing PLWS System
MPC PLWS MODELMPC PLWS MODEL
Start
1. Create awareness on PLWS among management
team
2. Measure company’s performance
3. Develop PLWS Committee
4. Developing Corporate, Division & Unit KPI
5. Briefing Session with Company’s Workers
6. Obtain feedback from employees and management
8. Establishing PLWS on a trial basis
9. Review and make the necessary adjustments
10. Implement PLWS at the
firm level7. Linking Incentives with Improvement
11. Plan (continuous Improvement)
PHASES IN IMPLEMENTING PLWS
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COMPONENTS OF PLWS
BASIC WAGE
FIXED COMPONENTS
Wage increase for the year based on:-
Productivity, orProfit sharing formula
VARIABLE COMPONENTS
There must always be the fixed and the variable component in
the PLWS
ANNUAL INCREAMENT
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PLWS Model 1:
Profitability Model
• Payment of bonus according to profit levels based on monthly basic pay.
• Payment of bonus according to profit levels based on monthly basic pay.
Profit After Tax(RM Million)
Bonus[Month(s)Salary]
<1.5 (threshold) 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
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PLWS Model 1:
Profitability Model
• Bonus payments paid in quantum (RM)
• Bonus payments paid in quantum (RM)
Profit Before Tax(RM Million)
Bonus(RM)
<5 (threshold) 0
5 - 7 500
7 - 9 1,000
9 - 11 1,500
11 and above 2,000
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PLWS Model 2:
Productivity Model
• Bonus paid out at the end of the financial year based on saleable output.
• Bonus paid out at the end of the financial year based on saleable output.
Production Volume (000 m2) (Saleable Output
<5,500 <5,600 <5,750 <6,000 <6,250 <6,500
Bonus (Months)
0 0.25 0.75 1.25 1.75 2.00
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PLWS Model 2:
Productivity Model
• Incentives given based on the productivity targets achieved (Individual).
• Incentives given based on the productivity targets achieved (Individual).
Planned Target Actual Achievements Incentive (RM)
80% Above 100% 150
80% 91 – 100% 100
80% 80% - 90% 50
80% Below 80% 0
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PLWS Model 2:
Productivity Model
• Incentive given base on identified monthly productivity indicators and linked to the team incentives (Team).
• Incentive given base on identified monthly productivity indicators and linked to the team incentives (Team).Performance
CriteriaPerformance
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
No. ofCriteria
Achieved
Incentives(RM)
5 100
4 80
3 60
2 0
1 0
• If team of 5 employees able to achieves all 5 criteria RM100/ team member
• If team achieves only 2 criteria No incentives
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PLWS Model 3:
Combine Model
• Payment of bonus according to 2 criteria – Company Performance and Employee Performance Rating
• Payment of bonus according to 2 criteria – Company Performance and Employee Performance Rating
Operating Profits (RM Million)
Variable Productivity payment (Months)
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
Employee Performance Rating (%)
<40 40 - 49 50 - 59 60 - 69 70 - 79 >80
INDUSTRIAL RELATIONS INDUSTRIAL RELATIONS (AMENDMENT) ACT 2007(AMENDMENT) ACT 2007
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Section 13: Collective Section 13: Collective Bargaining Bargaining
(2A)(2A) A proposal for a collective agreementA proposal for a collective agreement
may provide for one or more of the may provide for one or more of the
following:following:
(a) (a) provision for training to enhance provision for training to enhance skills skills and knowledge of the workmen;and knowledge of the workmen;
(b)(b) provision for an annual review of provision for an annual review of the the wage system; and wage system; and
(c)(c) provision for a performance-basedprovision for a performance-based
remuneration system.remuneration system.
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PLWS in Collective Agreement
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Sector Total Number of Collective Agreement Number of CA / Percentage With PLWS
2010 2011 2012
2010 2011 2012
No. % No. % No. %
Manufacturing 195 180 147 144 73.85 129 71.67 125 86.81
Services 116 117 127 88 75.86 95 81.20 111 87.40
Agricultural 17 17 13 15 88.23 17 100.00 13 100.00
Others 2 6 9 2 100 6 100.00 7 77.78
Total 330 320 293 249 75.45 247 77.19 256 87.37
DISTRIBUTION OF COLLECTIVE AGREEMENT (CA) WITH PLWS BY SECTORS –2010- 2012
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No Elements Manufacturing(125)
Services(111)
Agricultural(13)
Construction(3)
Quarry & Mining(4)
Bonus Payments
1. Contractual Bonus 88(70.4%)
51(45.9%)
1(7.7%)
1(33.3%)
2(50.0%)
2. Bonus Based on Management Discretion 37(29.6%)
31(27.9%)
2(15.4%)
1(33.3%)
2(50.0%)
3. Fixed and Additional Bonus 7(5.6%)
3(2.7%) - - -
4. Bonus Based on Profit/ Company Performance
17(13.6%)
30(27.0%)
3(23.1%)
1(33.3%) -
Annual Increment
5. Yearly Increment 115(92.0%)
106(95.5%)
5(38.5%)
2(66.7%)
2(50.0%)
6. Increment based on Merit 23(18.4%)
26(23.4%) - - 1
(25.0%)Incentives/Allowances
7. Group Target 1(0.8%) - - - -
8. Individual Target 1(0.8%) - 2
(15.4%) - -
9. Service Charge - 14(12.6%) - - -
10. Skill Allowance 5(4.00%)
7(6.3%) - - -
11. Piece Rated Incentives - - 2(15.4%) - -
12. Commitment / Attendance Incentives 59(47.2%)
11(9.9%)
3(23.1%)
1(33.3%)
1(25.0%)
13. COLA 5(4.0%)
17(15.3%) - - -
14. Cost and Time Saving Incentives - - - - -
15. Price Bonus - - 2(15.4%) - -
16. Long Service Award 9(7.2%)
21(18.9%) - - -
17. Outturn Incentives - - 6(46.2%) - -
18. Performance Allowances for Maximum Scale Employee - - - - -
19. Trip Incentives 2(1.6%)
9(8.1%) - - 1
(25.0%)
20. Quality Service Allowance 1(0.8%)
1(0.9%) - - -
21. OMO Incentives - - - -
22. Coaching/Teaching Allowance 2(1.6%)
12(10.8%) - - -
23. Productivity Payment 4(3.2%)
3(2.7%) - 1
(33.3%) -
ELEMENTS OF PLWS IN CA BY SECTORS, 2012
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PLWS Examples.PLWS Examples.
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Wage System
Fixed Components
Variable Components
Basic PayWage
Min. Annual Increment
Profitability ProductivityIncentives
Combined
Example 1:Incentive Based on Performance and Productivity
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Profitability
Profit sharing formula to determine “money in the pot”. The wage incentive will only be given if the profit falls within a predetermined range
Total Bonus = Profit After Tax Monthly Payroll Cost
Variable ComponentsProfitability Incentive – the profitability incentives will be pay when the profits fall within a predetermined range as shown in Diagram : Profit Sharing
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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(RM Million)
Bonus = Profit After Tax 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
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Productivity
Based on team and individual performance against predetermined productivity measurement
• Total output• Quality output• Wastages• Customer Satisfaction• Individual Performance
Productivity Incentives
The incentives will based on team and individual performance against predetermine productivity measurement.Diagram: Productivity Incentives
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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
AveragePerformance
(%)
Less 70 70 -80 80-90 90-100
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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.
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Performance Rating
Increment Rate
Performance
Bonus
5-Well above target 4.00% 2.5 months
4-Above target 3.00% 2.25 months
3-Target realized 2.50% 2 months
2-Target almost realized 1.50% 1.25 months
1-Target not realized 0.00% 0.5 month
Example 2:Increment and Bonus Based on Performance and Productivity
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CompanyPerformance Band 1 Band 2 Band 3Employees
Performance A B C A B C A B C
Fixed 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2
Variable 0.7 0.6 0.5 0.6 0.5 0.4 0.5 0.45 0.4
Total 1.9 1.8 1.7 1.8 1.7 1.6 1.7 1.65 1.6
Example 3:Incentive Based on Performance and Productivity
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Company Performance (After Tax) RM Bonus (Month)
No Profit 0.50
Zero but less than 10 million 1.00
10 million but less than 25 million 1.25
25 million but less than 50 million 1.50
50 million and above 1.75
Example 4:Incentive Based on Performance and Productivity
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Variable Incentive Scheme
Gross Operating Profits (in term of percentage of achievement)
Bonus in term of number of
months
More than 110% of annual budget 1.5
105% to 109.99% of annual budget 1.25
100% to 104.99% of annual budget 1.0
95% to 100% of annual budget 0.5
90% to 95% of annual budget 0.25
<90% of annual budget -
Example 5:Incentive Based on Profits
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NPAT 1million or more or
ROE 6% Bonus NPAT (mil)Whichever is higher 0.33 month 1-1.5
>6.00% to 8.00% 0.50 month 1.5-2 >8.00 to 10.00% 0.75 month 2.00 - 2.75
>10.00% to 12.00% 1.00 month 2.75-3.25>12.00% to 14.00% 1.25 month 3.25-2.75>14.00% to 16.00% 1.50 month 3.75-4.25>16.00% to 18.00% 1.75 month 4.25-4.75
>18.00% 2.00 month >4.75
Example 6:Incentive Based on Performance and Productivity
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Planned Rework Actual Acheivements Incentives (RM)*
10% of the monthly output > 11% 0
10% of the monthly output 8%-10% 10.00
10% of the monthly output 5%-7% 15.00
10% of the monthly output 2%-4% 20.00
10% of the monthly output 0-1% 25.00
Example 7. Rework Incentives
Incentives will be paid when there is reduction in rework rate.
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Example 8: : Performance Incentives AllowancePerformance 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
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Example 10: : Monthly Performance Incentives Scheme Monthly Performance Incentives Scheme
The company will pay performance incentives based on the qualifyingcriteria set by the company. Each employee must meet all the criteria tobe eligible for the incentives. The amount of the incentives will increasefrom month to month. For example in an employee can achieved all thecriteria for January to December than the total incentives received bythe employee will be RM 750.00 (Table 6). However if the employee failto meet any one of the qualifying criteria in any given month will renderthe employee to restart at the minimum amount of RM 35 per month uponmeeting the qualifying criteria for the month.
Qualification Criteria:a. Nil late attendance for that month except with valid late comings reasons needs to
be approved by respective Head of Department.b. Nil absenteeism for the month except with valid reasons needs to be approved by
respective Head of Departmentc. Only one (1) medical leave for the monthd. Nil disciplinary record for the months i.e. written counseling , warning letter
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Months Monthly Amount (RM)
Accumulated Monthly Amount (RM)
January 35 35
February 40 75
March 45 120
April 50 170
May 55 225
June 60 285
July 65 350
August 70 420
September 75 495
October 80 575
November 85 660
December 90 750
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PLWS Model
Six Model
Recommended
Bonus Based on Profits/Returns
Increment Based on Performance
Incentives based on employees quality
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Incentives Based on Individual/Team/Company Performance/Target
Incentives Based on Skills
Bonus based on Sales/Total Output
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HOW TO DEVELOP
PLWS
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Establishment of PLWS Taskforce
• The company establish taskforce on PLWS implementation comprises of all the head of department and Human Resource Managers as secretariat.
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PLWS TASKFORCE
Advisor(Directors)
PLWS Committeei.Head of each Department
ii.HR Department (Secretariat)iii.Employee representative
Production QA Safety & Health HR / Finance
Maintenance Sales & Delivery Procurement
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Determining KPI
• The company identify 7 critical KPIs that determine company performance
• The members will rank from 1-7 the KPIs and will choose the most important KPIs to be deal with.
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Current Company’s KPIs Rank the most critical objective to achieve by the company.
No Mission Objective Rank(1-7)
1 To proactively pursue sustainable growth, provide products, services and solutions of the highest quality and deliver more value to ensure a high level of satisfaction among our customers.
To increase 15% domestic market share by the year 2015.
3
2 We place the upmost importance on the Health and Safety of our employees.
To achieve zero accident rate consecutively for 6 months. 2
3 We promote and implement creative, innovative ideas and solutions to produce value added and innovative products and services.
To implement one breakthrough kaizen project per department per year.
4
4 We act with absolute honesty, integrity and fairness in all our business dealings and corporate activities in compliance with the laws and regulations.
To achieve 100% compliance with all the laws and regulations and code of conduct.
7
5 We recognize, respect and value diversity as a source of strength in building the team, while embracing the importance of both personal and professional ethics in our work, behavior, and lives.
To conduct the yearly employee satisfaction survey and take necessary actions. 5
6 Proactively pursue cost reductions and eliminate operational waste to improve the competiveness of our products.
To reduce 10% operating costs by the year 2015 by improving the efficiency of the manufacturing process.
17 To minimize any environmental impact through
conserving resources and preserving the quality of the surrounding environment.
To reduce the industrial waste by 1.5% on yearly basis. 6
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Based on the ranking the company decided to select the KPI
Based on the ranking the company decided to select the KPI
To reduce operating cost by 10% in year 2015.
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• All the department were given task to reduce their monthly operating cost by 10%.
• The head of department will identify the area, root cause and action plan to reduce the cause by 10%.
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Production DepartmentProduction Department
S/N KPIs ROOT CAUSE ACTION PLAN
1. To reduce overtime cost by 10 %.
OT to do non productive job for example repairing job and waiting time during trouble.
OT when necessary and spend more for Kaizen and Routine maintenance.
2. To reduce energy cost i.e. natural gas & electricity by 10%.
Energy audit and eliminate unnecessary motors and air wiper.
Energy audit and provide one year action (PDCA)
3. To reduce consumable & spare by 10%.
SCR : Frequent change belt and IPA easy to evaporate
Drawing : Dies, capstan ring and contact parts damaged.
SCR : Review belt life time and install IPA recovery machine
Drawing : Root cause analysis and PDCA activity
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Maintenance DepartmentMaintenance Department
S/N KPIs ROOT CAUSE ACTION PLAN
1. To reduce overtime cost by 10%.
OT to do non productive job for example repairing job and standby during production.
OT when necessary and spend more for Kaizen and Routine maintenance.
2. To reduce repair & maintenance cost by 10%.
No enough TPM and machine kaizen activity.
Repeating problem same symptom and situation.
Proceed to do major part replacement job, capex and kaizen activity.
Promote root cause analysis activity at Maintenance Department.
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QA DepartmentQA Department
S/N KPIs ROOT CAUSE ACTION PLAN
1. To reduce overtime cost by 10%.
Basic understanding QA overtime is follow production schedule.
For QA over time, need to check detail production plan and arrange manpower base on QC Inspector capability.
2. To reduce quality control cost by 10%.
Over plan on QA budget for equipment accessories and for other's item.
Plan QA budget follow actual expenses from last year.
Request Purchasing to get more cheaper quotation for compare.
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S/N KPIs ROOT CAUSE ACTION PLAN
2. To reduce transportation cost (outbound) by 10%.
Machine problems- Urgent delivery.
Delivery of small orders under full load capacity.
Collection for empty baskets.
Pallet collection from northern - high cost/pc.
Limitation in outbound forwarding rate due to volume constraint.
Negotiation with provider for lower charges.
a) Urgent delivery before 10.00am - normal rate.
b) Urgent delivery after 10.00am - additional 50% of normal rate. If unavoidable, try to arrange for collection of basket.
Consolidating with other loose cargoes.
Full load collection. Collection for recycling. For Hi-
Essence to dispose. Joint account with procurement
for in/out bound forwarding.
Sales & Delivery DepartmentSales & Delivery Department
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Human ResourceHuman Resource
S/N KPIs ROOT CAUSE ACTION PLAN
1. To reduce overtime cost by 10%.
No proper time management on daily & weekly planning.
Ad-hoc activities.
Monitor overtime hours according to budgeted overtime hours.
Plan and execute project in advance to allow sufficient time for the work to be completed during normal working hours.
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THE COMMITTEE’S TERMS OF REFERENCE (TOR)
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