WRITESHOP

Productivity Based Pay (PBP) Policy

Labor-Management Committee

R e g i o n a l Tr i p a r t i t e W a g e s a n d
P ro d u c t i v i t y B o a r d I V - A ( RT W P B I V- A )
National Conciliation and Mediation
B o a r d I V- A ( N C M B I V- A )
C a v i t e E x p o r t P ro c e s s i n g Z o n e ( C E P Z )

2 3 J u n e 2 0 1 4 • 8 : 3 0 a . m . t o 5 : 0 0 p. m .
At the end of the session,
participants are expected to
formulate their respective PBP
Management System that
reflects their company’s
objectives, strategies and core
principles.
Specifically, participants will
draw up the following:
1. Company PBP Policy
2. Criteria and Measures of
Performance/Productivity
3. Productivity Improvement
Programs
4. Committee to manage and
monitor the PBP system
Formulate a Productivity Based Pay policy (In
conformance with the Advisory Guidelines on PBP under
WOs 15 & 16) encompassing rewards and incentives
unilaterally provided by management

Establish Productivity Improvement Programs and

quantify results/impact

Develop model/s for determining the PBP and

identify criteria for measuring individual, group
or company-wide performance

Organize a structure mechanism that will manage

the PBP system
Core Pillars : PBP Management System

Management
Commitment

Communicat Employee
ion Involvement

Rewards Continual
Recognition Improvement
PBP Management System
Productivity Based Pay Policy

What

How Who

POLICY

Why Where

When
 Productivity Based Pay Policy
ABC Productivity Based Pay Program
Title: ABC Policy on Productivity
Based Pay Program
Who
Policy No. 08 Series of 2014

Effectivity: 01 May 2014

How Where
Supercedes Policy No. ___
What
Distribution: All Employees

Recommending Approval: PIIC/LMC

Why When
Approved By: ______, President
 Productivity Base Pay Policy
ABC Productivity Based Pay 1. Description/Objectives:
Program ABC PBP Policy is established to provide guidelines in
the granting Productivity Based Pay, incentive or
rewards to covered and qualified employees based on
Who
pre-determined and approved criteria. The PBP policy
shall form part of the Human Resource Management
System of the company.
How Where
PBP refers to additional remuneration related to
What individual, group or organizational
productivity/performance, or a combination of criteria
determined by the PIIC.

The objective is to recognize employees’

Why When productivity/performance by providing incentives,
rewards, and/or commendations, allowing them to gain
higher income, to continuously strive in improving their
skills and capabilities, to enhance employees’ morale
and commitment in the attainment of company
established targets and performance indicators .
 Productivity Based Pay Policy
ABC Productivity Based Pay Program 2. Scope of Application:

What The PBP shall be company-wide in

its application.

All daily and monthly paid

How Where employees with at least 6 months
of service are eligible/covered by
Who the PBP policy.

Rank and file employees and

workers of agency contractors are
Why When covered by the program.

Excluded from this policy are top

level management.
PBP Management System
 Productivity Based Pay Policy
ABC Productivity Based Pay
Program 3. Productivity Based Pay

The PBP is variable in amount, the pay out

Who of which is dependent on either individual,
group/team, department/functional unit
performance in relation to the achievement
of company set targets/goals for a certain
How Where period of time.
What The amount of PBP shall be determined
based on the Guidelines issued and approved
by the PIIC and management.

Why When The PBP may cover short term and long
term incentives.

Pay out of PBP may be in cash, in kind or

“de minimis” form of incentive.
 Productivity Based Pay Models

Attendance and
Performance
Who

How Where Profit, Salary Scale

and Performance
What

Multiple Criteria
* Job knowledge, Quality
Why When of Work, Attitude,
Communication,
Attendance
 Attendance and Performance

Employee Attendance Tardiness % AT Performanc PBP Amount

(%A+%T)/2 e of Increase
Rating
A
-Absences (1 day) 25 days present 25 days not tardy (96.2%+96.2%)/2 average Php 16.00/day
-Tardiness (1 day) 26 working days 26 working days = 96.2%
-PR ( average ) *100 = 96.2% *100 = 96.2%

B
-Absences (3 days) 23 days present 26 days not tardy (88.5%+100%)/2 average Php 15.00/day
-Tardiness (none) 26 working days 26 working days =94.25%
-PR (average) *100 = 88.5% *100 = 100%

C
-Absences (none) 26 days present 26 days not tardy (100%+100%)/2 average Php18.00/day
-Tardiness (none) 26 working days 26 working days =100%
-PR (average) *100 = 100% *100 = 100%

PBP Amount based on

Performance Rating Ave. Attendance & Industry PBP Range of
Tardiness Rating Increase
At least average 90 - 91.99 16.00
Productivity Performance Rating 92 - 93.99 17.00
Based Pay based on the applicable 94 - 95.99 18.00
Equivalent criteria and nature of
96 - 97.99 19.00
Matrix work
98 - 99.99 20.00
Industry Sector 100 P337*6.1% = 21.00
 Multiple Criteria

ACTUAL SCORE (%)

STANDARD
CRITERIA Employee Employee Employee
SCORE (%)
A B C

1. Job knowledge 26 23 25 26

2. Quality of work 17 14 16 17

3. Attitude 27 24 25 26

4. Communication 10 9 9 9

5. Attendance 20 20 19 20

Total (%) 100 90 94 98

Productivity Based Pay Equivalent Matrix

10% of P400 12% of P400 14% of P400 or
Equivalent Amount of PBP (% of current wage rate)
or P40 or P48 P56

Equivalent Amount of PBP (% of current wage

RATING LEVEL
rate)
95.01% - 100% A 14%
90.01% - 95% B 12%
85.01% - 90% C 10%
80.01% - 85% D 8%
75.01% - 80% E 6%
 Profit and Performance-Based

Criteria: Emplo Daily Number Monthly

Productivity Increase (using company level measurements) yee Basic of Basic Pay
Net Profit Before Tax or Return on Sales Pay working
(Profit Margin generated per Peso Sales)
Performance Rating (PR) Individual Performance Rating days
Present
Assumptions: A 315 23 days 7,245
Applicable Basic Wage P337-P600 per day; Service Industry
PBP increase – uses the lower range PBP levels - 8.4% B 337 26 days 8,762
Net Profit Before Tax (for the month ) P 100,000.00 C 400 25 days 10,000
Total Savings due to inc. yield, dec. cost, reject 50,000.00
D 600 26 days 15,600
Amount for Distribution (100K*8.4%+50K 8 *40%) 28,400.00
Total Labor Cost or Payroll (for the mo.) P 41,607.00 Total 41,607
Payrol
Weighted
l Points
Multiplie
(Per Total PBP Average
Average r
Employe Monthly Average employee PBP for Increase PBP
Perfor (Monthly
e Basic Credited (b x c x d) /Totals) Sharing for 3 Increase
mance Basic Pay
Pay Work column Months per
Rating per
Days e period month
employee
(f x g) (h/y)
/ Totals)
a b c d e f g h i
A Php7,245 85.0 0.1741 23/26 0.1309 0.1512 P28,400 P4,294 P186.70
B 8,762 90.0 0.2040 26/26 0.1836 0.2121 28,400 6,024 231.69
C 10,000 88.5 0.2403 25/26 0.2045 0.2362 28,400 6,708 268.32
D 15,600 92.5 0.3749 26/26 0.3468 0.4006 28,400 11,377 437.58
Totals 41,607 0.8658 28,400
 Productivity-Based Pay Increase - Piece Rate

Target Efficiency: 85%, Output beyond 85% target will be considered increase in labor productivity
Formula: PBP Increase per Day = Increase in Output/Day x Piece Rate/Day
Basic Requirement: Piece Rate and Production Standard Order issued by RTWPB-IVA

Assumptions:
Applicable Wage Rate P362.50 per day
Company Standard Efficiency Level 85%

Piece Actual Increase in

Employe Rate per Quota/Outp Output/Da PBP
e Minimum Day Standard Standard ut per Day y subject Increase
Wage Rate Quota/Outp Quota/Out Qua Efficie to PBP per Day
per Day ut per Day put per Day ntit Increase
ncy
(a/d) at 100% at 85% y Rate
a b c d e f g h
(e-d) (gxb)
A Php362.50 Php4.26 100 85 86 86% 1 Php 4.26
B 362.50 4.26 100 85 90 90% 5 21.30
C 362.50 4.26 100 85 95 95% 10 42.60
D 362.50 4.26 100 85 98 98% 13 55.38
 Performance Appraisal System

Technical Technical Competence

1. (91*60%) = 54.60%
Competence (60%)
Personal Traits
2. (94*40%) = 37.60%
91.20
Personal Traits (40%)
Attendance
3. and Tardiness
= 91.30%
• A (22/23=95.65)
• + T (20/23=86.96)
Attendance and Punctuality
(DPT/WD=%)
Overall Performance
4.
Rating = 91.25
 Performance Appraisal System

EQUIVALENT AMOUNT OF PRODUCTIVITY BASED PAY

Net Points (%) Descriptive Points PBP

Amount

96 - 100 Exceptional Performance=Outstanding P25.00

90 – 95.99 Superior Performance=Above Average P20.00

84 - 89.99 Fully Satisfactory=Average -

78 – 83.99 Minimally Satisfactory= Fair -
Below-77.99 Unsatisfactory= Needs Improvement -

* Eligible for a PBP are those with above average to outstanding PR.
 Quality & Productivity Targets

QUALITY AND PRODUCTIVITY TARGETS

Rating Level 1 2 3 4 5
Quality 1-3 90% 95% 100% 105% 110%
target
4-5-6 > 90% 90-99% 100% 101-110% Above
Efficiency 110%
Call out 7 3 2 0 0 0
Kaizen Project 1 1
Productivity 1-3 90% 95% 100% 105% 110%
Target
Quantity 7 94% 95-99% 100% 100% 100%
Kaizen Project 1 1

PRODUCTIVITY BASED PAY AMOUNT

Rating 1 2 3 4 5
Amount/ P12.50 5% 6.54% 8.37% 10.2%
% of Basic Pay
 Key Performance Targets
KEY PERFORMANCE TARGETS
ITEM TARGET ATTAINMENT

Customer claim 0 0
NG In PPM 10,000 PPM 4,000 PPM Below

Wastage Cost 200,000 PHP 100,000 PHP

Delivery 100% 100%
Attendance 98% 98% above
Safety 99% 0 accident
PRODUCTIVITY BASED PAY AMOUNT
Category Cost (impact) of Improvement PBP

Category 1 Php 50,000 and above P500

Category 2 -Idea Php 10,000 P300
Category 3-Effort Php 1,000 P200
•Unlimited entry of P& Q suggested projects is allowed. Selected entries monthly will receive Php 100.
ATTENDANCE-BASED
PRODUCTIVITY IMPROVEMENT PROGRAM
OF NITTO DENKO PHILIPIPINES
PRODUCTIVITY IMPROVEMENT PROGRAM
OF NITTO DENKO PHILIPIPINES
Productivity Improvement Program/
Productivity Based Pay

 PERFECT ATTENDANCE
Employee who has no late, under time and no absence within the
covered month received P300.00 monthly and P5,000.00 annually. Only
allowed SL/VL with pay must be used to be considered as perfect attendance
awardee.

 GATE (Group Activity Towards Excellence)

Annually GATE competition is being practiced. Similar to Kaizen the
goal is to create a new project that would be beneficial to company’s
productivity. Monetary reward and Recognition is given to the winning group
and a chance to compete globally.

 SAFETY AWARD
Environmental, Safety and Health (ESH) Committee conducts Patrol
weekly to ensure that all employees are practicing Safety acts and
implementing 5S in their respective areas. The Group who has received the
highest points after 6months will receive a monetary reward and Recognition.
PBP Criteria and Measures
PBP Criteria and Measures
 PBP Criteria and Measures
Attendance-Based
PERFORMANCE-BASED
PBP Criteria and Measures
PROFIT-BASED
MULTI-CRITERIA
PBP Management System
PRODUCTIVITY IMPROVEMENT PROGRAM
 Productivity Improvement Program
ABC Productivity Based Pay Program 4. Productivity Improvement
Programs (PIPs)

What The Department heads shall propel

implementation of PIPs, evaluate employee
performance, identify and recommend to
the PIIC their respective employees’
How Where Performance Rating (using agreed set of
criteria).
Who
Productivity Improvement Program – an
intervention designed to improve the
productivity of all the factors of production
Why When or provision of service. The focus of PIPs may
include: reduction of costs, improvement of
quality of products/services, enhance
client/supplier satisfaction, etc.
 CORE BUSINESS PROCESS AND FUNCTIONAL UNITS

PROCESSES FUNCTIONAL UNITS RESPONSIBLE

Determine Market Needs • Marketing

Sell the Products/Services

• Sales

Develop the Products/Services • R & D/Product Development

 Materials • Human Resource Management

 Manpower • Materials Mgn’t/Purchasing Logistics

Production of
Products/  Machine • Maintenance/Engineering
Services
 Money • Finance

 Methods • IE/Technology/System Engineering/

Quality Assurance
Deliver the Products/Services • Warehousing/Distribution/
Transportation/ Technical

Bill and Collect

• Billing and Collection/Finance or Sales

Evaluate the Products/Services • Customer Relations

 Productivity Improvement Program
Focus of PIPs: 7 Wastes
MAN MACHINES MATERIALS

Motion Waiting Overproduction Processing Defects Inventory Transportation

Time Time

Waiting
Incorrect Large Stacks/ Unnecessary
lay-out time for batches movement
inputs Long storage
delays costs
Lack of Long set Making for Over Extra
proximity ups and the sake of
handling
of machine it Processing
lead times
High raw
Costly materials
Walking, Watching Wrong rework Excessive
lifting, etc. machines quantities distances

…. Wastes do not 45
add value!!!
 Problem Solving for PIPs
1. Problem Identification
8. Self-evaluation
and Future P 2. Analysis if the
Plan problem
L
7. Standardization
3. Identification
A of root causes

6. Evaluation of N
DO 4. Selection of best
result alternative solution
5. Solution
implementation
 8 Management Tools for PIPs

 Brainstorming  Causes & Effect

Diagram

 Checksheet
 Histogram
 Scatter Diagram
 Graphs & Charts

 Pareto Chart
 Control Charts
Recycle of gloves, cloth apparels, rags,
sanding discs, thinner, etc.25- 50% saving Controlled daily dumping of Saving realized=
surface conditioning bath 0.50 M pesos
resulting in a saving of
chemical (premaline) against
a quarterly dumping.
Also saved in bulk generation
Used Gloves Recycled Gloves of DI water replenishment
and water treatment of
Re-cycled Left Hand
dumped bath.
leather gloves
Better coating efficiency

Original 4th Cut

PRODUCTIVITY IMPROVEMENT PROGRAM
Shokiryudo @ Shop Floors
(KAIZEN Activities)

Implement a Q-Card System (pointing- Important A & B KANBANS Color identification and large
out common mistake at shop floor) installed at shop floors signs for HOAN BOSAI areas
KAIZEN REPORT

S TAR MO TO R MFG .IND.,INC . March 4,2009

1st quarterC OS T KAIZE N PRE S E NTATION DATE PREPARED
MATCON DEPARTMENT
P
ROBL
EM
VERIFICATION / ACTI
O NTAKE
N R
ESUL
T
INVESTIGATION
WHAT: Ayon sa imbestigasyon & 1) Kunin ang parts ng nail 1.) Naka repair kami ng
Dumarami ang returned Verification: puller na puede pang dalawang Nail Puller
deffective nail puller gamitin
•Tuwing magre-request ng
WHE R E : bagong nail puller ibinabalik ng 2) I assemble ang mga parts
ma tcon mga requisitioner ang mga parts ng nail puller na
deffective na nail puller sa ware puede pang gamitin Cost of nail puller
house. =Php 3,200 x 2 pcs
WHE N:
= 6,400.00
Tuwing nagpapalit ng nail
puller ang matcon personnel •Cost of Nail Puller Assemble nail puller = 2 pcs
=Php3200.00

Total Saving =
How :
Kunin ang parts ng nail Php 6,400.00
puller na puede pang YEAR ISSUED COST
gamitin NAIL
PULLER

2007 6 19,200.00
KAIZEN
2008 4 12,800.00
PROJECT
(QUARTERLY COMPETITION)

___________ ___________ ___________ ___________

Prepared by : Alberto Regodon Reported By: Ferdinand Magura Checked By: R. Ronquillo Approved By: Mr. R. Digman
KAIZEN COMPETITION

MAIN SAFETY
KAIZEN KAIZEN

TPM COST
KAIZEN KAIZEN
Problem:

Effects Before

 Walang holder ang tube bago

i-clamp kaya madalas ang dent.

 Kailangan pang alalayan ng

operator ang tube bago ito
i-clamp ng tube clamping para
maiwasan ang pagkakaroon ng
dent o pitpit.

 Hindi maiwasan ang magkaroon

ng dent o pitpit dahil minsan
hindi level ang pagkakahawak
ng operator.

 Mabagal ang paggawa.

Improvement:
Fabricated Tube Guide at DHB # 2 to eliminate Dent on Tube surface.

After : Benefits:

 Nilgagyan namin ng tube holder

sa may clamping para di na
alalayan ng operator.

 Naiwasan ang pagkakaroon ng

dent o pitpit dahil level na ang
tube sa clamping.

 Bumilis na rin ang paggawa.

 Reduced Rejection Rate / day / month
Saving :
Before: 6 pcs / day x 26 days
(May ) P 11,700.00
= 156 pcs / month
/ month
156 pcs / month x P 75.00
= P 11,700.00 / month

After: 0
( June ) Increased Productivity / day / month
Before: 115 pcs. / day x 26 days
Increased Productivity by: ( April ~ May )
= 2,990 pcs / month
30 pcs. / day or by
780 pcs./ month After: 145 pcs. / day x 26 days
= 3,770 pcs / month
 POOR STORAGE OF PARTS

BEFORE NO PROPER STORAGE

3D EFFECTS:

 EYESORE

 DEFORMATION OF PARTS

 OPEN TO SCRATCHES
 RACKS FOR STORING

AFTER
FABRICATED RACK FOR STORAGE

BENEFITS:

 AVOID DEFORMATION OF PARTS

 DAMAGED PARTS ARE EASILY

DETECTS.

 AVOID DOUBLE HANDLING

OF PARTS
 Productivity Improvement Program

Manually carries products

from Production to Staging
Area

Insufficient Push Carts to

transport FG from Higher fatigue and unsafe
Production to Staging condition of workers
Area

Finished Goods exposure to

scratches
PIP - Fabrication of Push Carts

BEFORE AFTER
Estimated Cost-Benefit PIP: Fabrication of Push Carts
Approximation of COST in Product Movement and Handling if PIP1 is NOT
implemented:
regular days/year (365 days less Sat, Sun &
248.00 Holidays)
Cost of Quality per yer P 348,074.00
x 0.50 time consumed/day
Less: Cost of Fabrication
620.00 total lost hrs/year (5 Regular Employee) repair of 4 Push Carts 106,135.56
MONEY EQUIVALENT:

278.70 Rate/hr /technician for 5 technicians Potential Savings per year P 241,938.44

x 620.00 total lost hr/yr.

Sub-total 172,794.00 Total lost amount/year by 5 technicians

BENCH MECHANIC (3rd party contractor)

313.00 No. of days/year required

X 0.5 time consumed/day

1,095.50 total lost hrs/year (7 pax)

160.00 Rate/hr for 7 pax

1,095.50 total lost hr/yr.
Sub-total 175,280.00 Total lost amount/year by 7 pax
Grand Total 348,074.00 Total lost amount/year
106,135.56 cost of implementation
241,938.44 Potential Saving per year
Productivity Improvement Programs
Productivity Improvement Programs
Productivity Improvement Programs
Productivity Improvement Programs
Productivity Improvement Programs
PBP Management System
Productivity Improvement and Incentives
Committee (PIIC)

An organizational structure within the

enterprise whose main function is to
operationalize the implementation of the
PBP provisions of the Wage Order

May be a newly created organizational

structure or an existing labor-management
organization enhanced to function as such

The composition shall have equal

representation from labor and management
to be headed by top level management
 Productivity Based Pay Policy

ABC Productivity Based Pay Program

4.Productivity Improvement &
Incentives Committee (PIIC)
What
To properly operationalize the PBP
policy, a PIIC is created with the
following composition, duties and
How Where responsibilities, objectives and
Who expected outputs.

The PIIC will administer and monitor

the implementation of the PBP
Why When programs. Recommends
performance parameters and
measurements to be used in the
provision of PBP.
 Productivity Improvement & Incentives Committee
What
ABC Productivity Improvement & Incentives Committee

General Objective: How Where

To establish a management system for the provision of Who

rewards/incentives in recognition of the employees’
contribution in the attainment of the company’s business
goals. Why When

Specific Objectives:
 Implement the PBP provisions of Wage Order IVA-16;
 Assess existing company policy and measures of performance
based incentives
 Uplift the motivation and morale of employees by introducing
productivity-related incentive schemes;
 Elevate the levels of performance of all employees thru PIPs
and PBP increments;
 Implement productivity improvement programs in the
workplace such as; just in time delivery, reduction of absences,
streamline processes, reduction of costs, etc.
Productivity Improvement & Incentives Committee

What

How Where

Who
Chairman
PIIC Why When
Manager Secretary

Line Support Sales/ HRD/

Operator Production
Leader/QA Services Marketing Finance

Members –Labor Members-Management

ABC PIIC Organizational Structure

 Organizational Chart

Chairman
(Top
Management)

Deputy
Union
Factory
President
Manager

QA Production HR Admin. Production Warehouse

Manager Manager Manager Staff Operator Staff
Productivity Improvement & Incentives Committee

ABC PIIC Duties and Responsibilities

Chairman
* Sets the direction, policy/ground rules and expected
output of the PIIC.
* Evaluates and approves the overall PBP/ incentive
schemes proposed by the PIIC.
What
* Approves the total budget proposal for PBP sharing.

How Where
Vice Chairman (PBP Manager)
Who
* Conduct regular planning/meetings, gather
information for the improvement and effectiveness
Why When
of the PBP program.
* Reviews and endorses the productivity program and
incentive schemes developed by PIIC members.
* Ensures and monitors implementation of PIPs & PBP
are aligned with the company’s overall policy and
strategies.
* Encourages everyone to participate in PIPs.
* Communicates the criteria, metrics of good
performance attributed to the provision of PBP
incentive.
 Productivity Improvement & Incentives Committee

ABC PIIC Duties and Responsibilities

Secretary
What

* Provides administrative assistance to the PIIC

How Where * Take down notes during committee meetings
Who * Assists the Chairman, Vice Chairman in facilitating the effective
operation of the committee

Why When Productivity Improvement Team (Members)

* Facilitates
the initiation of productivity improvement programs
(PIPs) company wide and measurement of outcomes
* Evaluates & recommends approval for implementation PIPs,
submitted by the different functional units including metrics
for determining possible result or impact
* Recommends, performance standards (targets) and criteria to be used
in determining the amount of PBP, covered workers,
frequency, etc.

Rewards & Incentives Team (Members)

* Plans, prepares and recommends PBP, reward & incentive schemes,
metrics, productivity/performance standards in relation
to the overall KPIs of the company
* Checks/verifies functional units’ productivity, employees’
performance records and finances
* Monitors/evaluates effectiveness of the reward & incentives program
Management strategy

Provides additional income for employees

The amount of PBP is variable

The criteria and measurements consensus

agreement between labor and management
PBP scheme may be for the individual, group
based or by functional areas. It could be short
term (monthly, quarterly) or long term (semi-
annually or annually).

PIPs have to be in placed to sustain the provision

of PBP.

The output of the PIIC shall be recommendatory

in character, top management makes the final
decision as to amount of PBP.

Ensure proper consultations on issues and

concerns, deployment of policies, and periodic
monitoring/assessment of its effectiveness.