THE EMPLOYEE SUGGESTION SYSTEM (ESS)

1. PURPOSE:

This procedure is made to promote both initiative and innovation, to strengthen

efforts at continuous improvement, and further encourage suggestions that are
process-focused and customer-driven.

2. SCOPE AND LIMITATION:

All employees of X are encouraged to submit suggestions.

3. DEFINITION OF TERMS:

EMPLOYEE SUGGESTION SYSTEM (ESS) - a system of providing

recognition and/or reward for proposals and innovative ideas submitted by
employees of X Its aims are:

3.1 To encourage employees to generate ideas for continuous

improvement in the workplace and which will enhance their own
development;
3.2 To institute an organized method for prompt evaluation and
implementation of ideas; and
3.3 To enhance competitiveness through reduced costs and new and
improved ways of doing things

4. RELATED DOCUMENTS:

NONE

5. PROCEDURE:

5.1 NEW PROCEDURE

5.1.1 DOCUMENT DRAFT

5.1.1.1 HR initiates the procedure by planning with the Operations

Manager and the Chief Operating Officer, on the scope and
coverage of proposals, mechanics, timelines, budget,
implementation phases, composition of evaluating
committee, and recognition ceremonies related to the ESS.

5.1.1.2 Initially, three (3) levels of proposals may be

considered:

5.1.1.2.1 Level 1 Suggestions for Cost Reduction

5.1.1.2.2 Level 2 Suggestions for Process Improvement
5.1.1.2.3 Level 3 Suggestions for Innovation

5.1.1.3 Level 1 suggestions (Cost Reduction) are those which

benefit X by reducing costs and expenses, but do not
 necessarily result in any improvement in the way things
are done. Examples are substitution of imported
supplies/materials with local ones, or reduction in volume
in purchase.

5.1.1.4 Level 2 suggestions (Process Improvement) are those

which deliberately seek to improve ways of doing things.
The suggestion must result in an improvement by way of
reduction in effort expended, reduction in time risks,
reduction in distance traveled, reduction in process steps,
and reduction in physical risks or other similar outcome.

5.1.1.5 Level 3 suggestions (Innovation) are those which result in

a NEW way of doing things. The suggestion must be new
in concept, approach and application.

5.1.1.5.1 A new concept may mean the introduction of a new

design or scientific model.

5.1.1.5.2 A new approach may refer to how a given concept

or technology is applied, such as a new
arrangement of equipment for motion or energy
economy.

5.1.1.5.3 A new application may refer to the conversion of a

process from manual to mechanical, electronic or
other ways.

5.1.1.5.4 To qualify for this level, the suggestion must

already have been awarded under Level 2.

5.1.1.6 No suggestion must result in a degradation or deterioration

of quality of the affected process, product or service.
Neither must safety be ever compromised.

5.1.1.7 Evaluation of suggestions shall consider the following

criteria: Originality, Technical Feasibility, and Cost
Effectiveness.

5.1.1.7.1 For Originality:

5.1.1.7.1.1 The suggestion must not be inherent

to the job of the proponent. Examples:
reducing overtime, or promptly
replacing a worn-out part.

5.1.1.7.1.2 The suggestion must be unique,

marked by extra initiative and
resourcefulness.
5.1.1.7.1.3 The originality of suggestion is
localized within the unit of the
proponent.

5.1.1.7.2 For Technical Feasibility:

5.1.1.7.2.1 Functionality: The suggestion must

explain why or what makes it
 function/operate according to science,
engineering, logic, experience or
common sense.

5.1.1.7.2.2 Superiority over present conditions:

The suggestion should be truly a
change for the better.

5.1.1.7.2.3 Availability of resources for

implementation: People, utilities,
technology, or materials must be
available for trial implementation and
their supply adequate for continued
operation and maintenance.

5.1.1.7.3 For Cost Effectiveness:

5.1.1.7.3.1 The suggestion should point to one or

more readily identifiable potential
savings.

5.1.1.7.3.2 Based on the nature and number of

identified potential savings and the
predictability of the results, a
substantial degree of confidence or
assurance must exist to realize the
potential savings.

5.1.1.7.3.3 The estimated or anticipated peso

impact of the potential savings should
be much greater than the estimated
cost of implementation. If the
suggestion requires substantial funds,
a formal financial study may be
necessary.

5.1.1.7.3.4 Suggestions for cost-effectiveness

should:

5.1.1.7.3.4.1 Identify the nature of the

savings such as direct,
downtime, efficiency, and
incremental.

5.1.1.7.3.4.1.1 Direct savings result

from changing,
substituting,
eliminating, or
replacing the usual
requirement or
procedure to
generate the same
or better results, or
reducing labor cost.

5.1.1.7.3.4.1.2 Downtime savings

are derived from
 reducing the normal
average downtime
for a long time
through a new
system or procedure.
Examples are
savings from
equipment utilization
and labor.

5.1.1.7.3.4.1.3 Efficiency savings

result from reducing
cost to procedure,
and increase in
productivity.

5.1.1.7.3.4.1.4 Incremental savings

effect increase in
sales volume directly
attributed to the new
system or procedure
used, minimized lost
sales due to
downtime, and
increased production
volume due to
increased efficiency.

5.1.1.7.3.5 Savings through the above types shall

be calculated as follows:

5.1.1.7.3.5.1 Type 1 Savings - For

suggestions with direct savings
of manhours, or materials
(whether direct or indirect)
which lead to increased profit:

Net Annual Savings (NAS) here is NAS = GAS AFE

where:

GAS = Gross Annual Savings

= Gross Savings (P)

_______________
Life of Project (yrs)

AFE = Annual Funds Employed (Investment)

= Total Funds Employed (P)

________________________
Life of project (yrs)

5.1.1.7.3.5.2 Type 2 savings For

suggestions whose predominant
 effect is profit caused by
increased sales.

5.1.1.7.3.5.3 Type 3 savings For

suggestions whose predominant
effect is reduced use of funds.
This means:

Funds saved multiplied by the cost of money to company.

5.1.1.8 Guidelines for submission of suggestions are:

5.1.1.8.1 A suggestion may be under any of the three

categories, provided it has not been implemented
before nor standardized in any department.

5.1.1.8.2 The suggestion should include a description of the

present system, the proposed system when
applicable, an accompanying sketch, and design. It
should include all other areas that may be affected
in order to qualify for the correct category level.

5.1.1.8.3 Suggestions awarded in previous suggestion or

innovation programs, if any, cannot be re-
submitted.

5.1.1.8.4 Suggestions which are already part of standard

operating procedures (SOP) are no longer eligible
for submission. However, these SOPs should be
subject to sufficient documentation.

5.1.1.8.5 An improvement on a previously awarded

suggestion may be submitted and implemented,
but the monetary award will be based on the
incremental savings generated from the
improvement.

5.1.1.8.6 Suggestions similar in concept but different in

approach and application may be submitted and
implemented.

5.1.1.8.7 If two or more different suggestions are submitted

and neither can work without the other, the
suggestions will be treated as one and the
proponents shall get equal share, if awarded.

5.1.1.8.8 Suggestions resulting from broad management

directives (e.g. cost reduction, waste prevention,
energy conservation) are eligible for submission.

5.1.1.8.9 A quality circle and other similar work improvement

projects, if original, may qualify for the ESS.

5.1.1.8.10 Suggestions developed as a result of direct

knowledge acquired from any company-sponsored
 training here and abroad are not eligible. Neither
are those developed during training.

5.1.1.8.11 Suggestions should not include changes in

equipment or machine still covered by a warranty.

5.1.1.9 The awards for the three levels shall be:

5.1.1.9.1 For Level 1 (Cost Reduction): 10 % of the annual

potential savings, or a minimum of P 750 and a
maximum of P 5,000

5.1.1.9.2 For Level 2 (Process Improvement): 10 % of

annual potential savings, or a minimum of P 1,500
and a maximum of P 50,000. Projects with
intangible savings can be awarded P 500.

5.1.1.9.3 For Level 3 (Innovation): 10 % of annual potential

savings less the P 50,000 maximum award at Level
2, or minimum of P 3,000 and maximum of P
80,000.

5.1.1.10 Trial implementation of the suggestion depends on the

nature of the suggestion, but no shorter than three (3)
months.

5.1.1.11 Eligibility for participation in the ESS is subject to the

following:

5.1.1.11.1 Employees in positions primarily tasked to look for

new ways of doing things may participate in the
ESS, but only if their suggestions fall beyond their
respective areas of responsibility.

5.1.1.11.2 All company officers are not eligible for monetary

awards.

5.1.1.11.3 Retirees, transferees and resigned employees

whose suggestions were submitted while still
employed at FoxGate Solutions, Inc. are eligible for
monetary awards.

5.1.1.11.4 Employees dismissed for cause are not eligible

5.1.1.12 Awarding ceremonies shall be conducted annually.

5.1.1.13 The Chief Operating Officer shall set up the ESS

Committee and determine the composition of membership,
as well its full range of programs, functions and
responsibilities.
6. RESPONSIBILITIES:

HUMAN RESOURCES

Facilitates the awareness drive for the ESS, drumbeats

participation of employees in the program and ensures the
availability of all pertinent ESS forms for employees use.
Oversees the preparations for the annual awarding ceremonies.
Ensures that the ESS awardees 201 Files are provided copies of
the commendations and other pertinent documents about the
awards given.

DEPARTMENT HEAD

Explains the mechanics of the ESS to all employees in his/her

department.
Provides guidance and expertise to all queries about operations
in his/her department.

FINANCE MANAGER

Assists in the computation of the monetary awards according to

the formula and other details approved by FoxGate Solutions,
Inc.
Releases the awards within the established timelines.

CHIEF OPERATING OFFICER

Approves the ESS Program and appoints membership to the ESS

Committee.
Acts on the proposed budget for the ESS Program.
Champions the ESS Program, or designates his representative.