Gainsharing

Gainsharing is a group incentive plan that pays a team a pre-agreed share of measured cost savings or productivity gains against a baseline standard, rather than a share of overall company profit.

What it is

See it move

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A packaging line's baseline labour cost is €180,000 for a month's output. After a productivity drive, the team completes the same output for €152,000, a gain of €180,000 − €152,000 = €28,000. Under a 50/50 sharing rule the team receives €28,000 × 0.50 = €14,000, and the company keeps the remaining €14,000.

The formula

LaTeX

G = C_{B} - C_{A}

Variables

$G$: Gain (€)
$C_{B}$: Baseline cost (€)
$C_{A}$: Actual cost (€)

The cost saving achieved against the baseline standard, measured at the same volume of output, before any of it is shared out.

LaTeX

P = G \times s

Variables

$P$: Employee payout (€)
$G$: Gain (€)
$s$: Employee share of the gain (ratio)

The portion of the gain distributed to employees under the plan's agreed sharing ratio; the company retains the rest.