1/23/2017

GainsharingConsulting:GainsharingVersusProfitSharingMasternak&Associates

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GainsharingBackground
WhatisGainsharing?
Gainsharingvs.Profit
Sharing
GainsharingDefined
GainsharingPhilosophy
GainsharingQ&A

TheDifferenceBetween
Gainsharing&ProfitSharing
ManypeoplewhoconfuseProfitSharingandGainsharing
viewthemasbeingoneinthesame.Employeeshavean
opportunitytoearnabonusunderbothapproaches,but
thatiswherethesimilarityends.Therearealways
exceptions,butthefollowingprovidesageneraloutlineof
themajordifferences.

Purpose

Application

Measurement

http://www.masternak.com/gainsharingversusprofitsharing.asp

Gainsharing

ProfitSharing

Todrive
performanceof
anorganization
bypromoting
awareness,
alignment,
teamwork,
communication
andinvolvement.

Tosharethe
financialsuccess
ofthetotal
organizationand
encourage
employee
identitywith
company
success.

Theplan
commonly
appliestoa
singlefacility,
site,orstand
alone
organization.

Theplan
typicallyapplies
organization
widecompanies
withmultiple
sitestypically
measure
organization
wide
profitability
ratherthanthe
performanceofa
singlesite.

Payoutisbased
onoperational
measures
(productivity,
quality,spending,
service),
measuresthat
improvetheline
ofsiteinterms
ofwhat

TheDifferencesinthe
PerformancePie
TheProfitSharingPie

Basedonyearend
profit
Paidannually
Noemployee
involvement

TheGainsharingPie

Basedonoperational
performance
Paidmorefrequently
thanannually
Employeeinvolvement
critical

Payoutisbased
onabroad
financial
measureofthe
organizations
profitability.

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employeesdo
andhowtheyare
compensated.
Funding

Gainsand
Payoutsare
resultingpayouts fundedthrough
areselffunded
companyprofits.
basedonsavings
generatedby
improved
performance.

Payment
Target

Payoutsaremade
onlywhen
performancehas
improvedovera
historical
standardor
target.

Payoutsare
typicallymade
whenthereare
profits
performance
doesnt
necessaryhave
toshowan
improvement.

Employee
Eligibility

Typicallyall
employeesata
siteareeligible
forplan
payments.

Someemployee
groupsmaybe
excluded,such
ashourlyor
union
employees.

Payout
Frequency

Payoutisoften
monthlyor
quarterly.Many
planshavea
yearendreserve
fundtoaccount
fordeficit
periods.

Payoutis
typicallyannual.

Formof
Payment

Paymentiscash
ratherthan
deferred
compensation.
Many
organizationspay
viaseparate
checktoincrease
visibility.

Historically
profitplanswere
primarily
deferred
compensation
plans
organization
usedprofit
sharingasa
pensionplan.
Todaywesee
manymorecash
plans.

Methodof
Distribution

Typically
employees
receivethesame
%payoutor

Thebonusmay
bealarger%of
compensation
forhigherlevel

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centsperhour
bonus.

employees.The
%bonusmaybe
lessforlower
levelemployees.

PlanDesign&
Development

Employeesoften
areinvolvedwith
thedesignand
implementation
process.

Thereisno
employee
involvementin
thedesign
process.

Communication

Asupporting
employee
involvementand
communication
systemisan
integralelement
ofGainsharing
andhelpsdrive
improvement
initiatives.

Sincethereis
littlelinkage
betweenwhat
employeesdo
andthebonus,
thereisan
absenceof
accompanying
employee
involvement
initiatives.

Payfor
Performance
Planversus
Entitlement

Gainsare
generatedonly
byimproved
performanceover
apredetermined
baselevelof
performance.
Therefore,
Gainsharingis
viewedasapay
forperformance
initiative.

Profitsharing
oftenisviewed
asaentitlement
oremployee
benefit.

Impacton
Behaviors

Gainsharing
reinforces
behaviorsthat
promote
improved
performance.
Usedasatoolto
driveculturaland
organization
change.

Littleimpacton
behaviorssince
employeeshave
difficultylinking
whattheydo
andtheir
bonus.Many
variablesoutside
ofthetypical
employees
control
determine
profitabilityand
thebonus
amount.

Impacton
Attitudes

Heightensthe
levelof
employee
awareness,helps

Influencesthe
senseof
employee
identitytothe

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developthe
feelingofself
worth,buildsa
sensesof
ownershipand
identitytothe
organization.

IfyouwouldliketolearnmoreaboutGainsharingorour
consultingservices,pleasecontactus.

Masternak&Associates
LibertyTreePlaza
1114NorthCourt,Suite195
Medina,Ohio44256
Phone:(330)7258970
robert@masternak.com

organization,
particularlyfor
smaller
organizations.

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