Gainsharing is a group incentive plan where all members of a group share in the ''gain'' of an organization. The typical gainsharing organization measures performance and through a pre-determined formula shares the savings with all employees. The organization's actual performance is compared to baseline performance (often a historical standard) to determine the amount of the gain.
Characteristics of a gainsharing plan include the following:
Gains and resulting payouts are self-funded. The plan usually applies to a single plant, site, or stand-alone organization. Performance is typically measured across departments/units/functions. Payout is often monthly or quarterly. Many plans have a year-end reserve fund to account for deficit periods. Employees are involved with the design process. All employees are eligible for plan payments. The bonus is often paid as an equal percentage of compensation or equal cents per hour worked, rather than paid on the basis of individual performance. A supporting employee involvement system is part of the plan in order to drive improvement initiatives.
