GainSharing

Posted in Finance, Accounting and Economics Terms, Total Reads: 271
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Definition: GainSharing

GainSharing is a concept where employees are given a certain share of profits when a company performs well. This capital gain given to the employees is given as an additional component apart from the salary or wages.


For example, a company has Rs X of profits. The company rule states that gainsharing will be s(X). So the agent will be getting s(X) and the principal will be getting X-s(X).


Attributes

Gainsharing

Aim

Drives performance of an organization by promoting awareness, alignment, togetherness, involvement in activities and openness.

Practicality

The plan commonly applies to a single site, center, or stand-alone organization.

Measures

Payout is based on operational measures which improves the view in terms of what employees do and how they are compensated.

Fund

Gains are based on the increased performance and they are funded by the company itself

Audience/Target

Payments are made only when the performance has improved drastically.

Eligibility

All employees at a site are eligible for gainsharing.

Frequency

Payment is often monthly or quarterly. Many companies have a year-end reserve fund to account for deficit times.

Form of Payment

Payout is cash rather than indirect compensation. Many organizations to increase their visibility pay the bonus through a cheque.

Method

All employees receive the same percentage of bonus.

Communication

A supporting employee involvement and communication system is an integral element of Gainsharing and helps drive improvement initiatives


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