Bonus schemes for hourly paid workers aren’t a new concept, yet in today’s warehousing world they’ve somewhat gone out of fashion. However, they are making a comeback, with employers recognising the benefits of introducing such schemes for warehouses.
In our latest blog, we explain how warehouses can implement bonus schemes and the importance of introducing incentives and rewards for staff as a way of boosting overall efficiency and morale in your warehouse.
Becoming the employer of choice is only half the battle
It’s no secret that the warehouse and logistics industry has been facing a labour shortage. Coronavirus and Brexit restrictions, as well as the continued growth in online shopping have led to a perfect storm of staffing issues for warehouses with vacancy rates high across the industry.
With warehouse talent becoming a scarce resource for businesses, a scramble to become the employer of choice has ensued as companies a bid to attract and retain the very best people.
Over the past year or so, many workers in warehouses will have seen no end of attempted improvements to their working environment such as facility upgrades, training room refurbishments, staff surveys, better quality uniforms being issued, flexible working arrangements, enhanced communication and improved pay rates.
Attracting and retaining the best people is tough and requires investments, perhaps like never before.
Employees are the largest cost item of a warehouse budget so getting the most from this precious resource is an imperative.
Implementing a bonus scheme: It’s all about fairness
In order to have an effective system of performance pay, measures need to be transparent and equitable and often this requires industrial engineering standards to inform target times. This is a topic we’ve spoken about in a previous blog post.
When it comes to implementing a fair scheme, travel time within a task, along with other geographical factors, must be allowed for.
Ultimately, employees need to be able to have the confidence to carry out a task, knowing that they won’t be penalised by factors outside their control such as disparately located stock. Therefore, it’s important that every element that could affect the time taken to complete an operation, is factored in.
With this in mind, how do logistics and finance directors go about calculating the bonus itself?
This is done by measuring the efficiency of an employee against a target task time along with their utilisation, the latter being the amount of time spent on, or indeed off, direct tasks.
Combining these two outcomes gives you the bonus equation and ensures fairness as it displays how effective the employee has been against a target time.
Why motivation is key
The busiest sales period is almost upon us and even in the current climate Black Friday and Christmas will test any warehouse’s capacity to deliver on orders.
Automation programs used to be largely about reducing the cost to serve whereas today it is becoming increasingly about the security of supply – can manual operations deliver peak volumes? The answer to that depends on whether you can attract and retain employees and if you can, at what cost?
The last thing anybody needs during this period is a failure to keep staff satisfied and motivated which can compromise a warehouse’s ability to deliver. Issues within the work environment can also lead to high turnover rates which means recruiting new members of staff on a regular basis, and we all know this can be a long and costly process.
Motivating employees with performance related pay or ‘a bonus scheme’, however, is a sure-fire way of rewarding high performers and offers a real and tangible incentive for improvement across your team.
Indeed, with trained and process-compliant people performing better, there’ll be a reduction in the need for short term agency workers and overtime. This minimises staff turnover and overtime costs, which will save you time and money and essentially mean bonus schemes can self-fund.
It will also aid in retaining top talent which is equally as crucial and having a consistent team of people, who are engaged and knowledgeable, will bring about higher levels of compliance along with fewer mistakes made.
Having this consistency is crucial to building a successful team and let’s face it when has an unsettled team of strangers ever won anything?
Selling the bonus scheme
If there’s one thing, we’ve learnt during our time working in the industry, it’s that the success or failure of the bonus scheme will ultimately depend on how well it is ‘sold’ to employees. The bonus scheme needs a set of rules everyone understands. Here’s some criteria we’ve encouraged clients to consider over the years:
- What is the efficiency target (reported as a %) at which bonus entitlement commences?
- What is the utilisation target (reported as a %) at which bonus entitlement commences?
- How much will the scheme cost to administer and is this the first saving the employer will make before triggering entitlements? This is likely and reasonable.
- How will quality be calibrated to ensure the quality of work produced remains as it is today and does not deteriorate?
Defining the parameters and having clarity on the criteria will make it easier for you to sell the scheme to your staff. Questions and queries raised by employees must be answered with confidence by the warehouse management team because when money’s involved, there’s no place for vague answers.
The bonus scheme will falter if the message is not crystal clear and easily understood.
What is the role of Vitesse® in measuring performance?
This is where Vitesse® comes in as our software measures efficiency and utilisation of employees in your warehouse. Vitesse® technology calculates the number of metres an employee is travelling to complete each task, therefore creating a much fairer target for each individual employee.
The X, Y, Z map coordinates created by Vitesse® software are key to this measurement, and thereby provide valuable insights that enable these distances to be reduced or altered where appropriate against that employee’s target.
Warehouse operators and managers can access real time data provided by us to understand an individual’s efficiency rather than simply an individual’s units per hour.
By using the data, operators can identify those performing below standard and use these pre-defined targets, set by the warehouse operator, to improve productivity and with the bonus scheme in place, there is a tantalising reason to do so.
This is a much fairer way of monitoring performance as the units per hour measurement doesn’t account for environmental factors and therefore is imprecise, as well as unfair. Vitesse implementations have supported a number of bonus schemes in warehouses.
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