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March 23, 2010
Using a Gain Sharing Plan as a Type of Incentive Pay within Your Organization

In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman discusses the use of gain sharing plans as a type of incentive pay within an organization. He explains that gain sharing plans provide a share of the savings or gains earned by an employer based on the suggestions or work contributions made by specific employees.

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For example, if a worker suggests a new production schedule that saves the employer $100,000 a year in costs, that worker might be given a $10,000 bonus check as thanks for making the suggestion.

One downside with gain sharing is that it usually has a limited shelf life. Getting increased or significant results with gain sharing usually becomes an issue as time progresses.

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. He can be reached at info@dankleinmanconsulting.com.

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