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© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Industrial Engineering and Ergonomics
Dr.-Ing. Dr. rer. medic. Dipl.-Inform. Alexander Mertens
Chair and Institute of Industrial Engineering and Ergonomics
RWTH Aachen University
Bergdriesch 27
52062 Aachen
Phone: 0241 80 99 494
E-mail: [email protected]
Unit 12
Remuneration and Motivation
Fall Winter 2017/2018
12 - 2© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Learning Objectives
You should know and understand,
• How remuneration is linked to motivation
• What remuneration consists of
• How job evaluations can be performed
• The impacts of performance assessment
• What the so-called collective wage agreement (ERA) contains.
12 - 3© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Pyramid of Needs According to Maslow
Self-Realization
Ego / Esteem Needs
Social Needs
Security / Safety Needs
Physiological Needs
Realization of the things we feel and want
Success, appreciation,self-esteem, power
Affection, admission into society
Stability, protectionorder, law
Thirst, hunger, reproduction, tranquility
12 - 4© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Motive Development and Motive Dominance According
to Maslow
Source: IAD (2007)
g
Relative priority
relationships
(intensities) of needs5 Self-realization needs
Fixations
Esteem needs
Social needs
Security needs
Physiological needs
Motivational
development as result
of satisfaction of needsDominance
of
physiolog-
ical needs
Domin-
ance of
security
needs
Domin-
ance of
social
needs
Domin-
ance of
esteem
needs
Dominance of
self-realization
needs
12 - 5© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Spectrum of Work Motivation
On scientific theories based work motives:
• Selection of relevant and generalizable motives
• Selection of effective incentives
Employee
involvement
Extrinsic Motives
• Remuneration
• Consumption
• Career
• Assigned Ressources...
Intrinsic Motives
• self-realization / performance motive
• Contact / attention
• Power
• Activity
• Autonomy…
12 - 6© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Forms of Remuneration
Separation
through ERA
lifted!
Wages for
industrial
workers
Salary for
employees
Remu-
neration
for civil
servants
Fee for
artists
Extra-
pay:e.g.:
flexibility premium
Performance-
related
component:Amount based
on performance; e.g.: piece
rate, quantity premium
Job demands-related
component:Amount based on
the assignment or task; e.g.: time
wages, basic wage with respect to
piece rate
Hourly wage Monthly wage
Piece rate
Premium rate
Program pay
Other types
12 - 7© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Definition Job Evaluation – Foundations of
demand-based wage differentiation
Job evaluation:
• Calculation of gradation of basic wage of job evaluation.
• The purpose is the determination and evaluation of objective demands made
by a work system on a working person (i.e., person independent).
• Basic idea: Tasks with higher demands require higher salary/wage
than tasks with lower demands.
Summary job
evaluation
Analytical
job evaluation
Demand-based wage
differentiation
12 - 8© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
The Job Evaluation Process
1. Summary job evaluation
• registration and evaluation of the
requirements of a work system as a
whole
• the demands determined are assigned
to a wage group
2. Analytical job evaluation
• work performance is divided into different
types of requirements
• the extent of demands are determined for
every single criterion
• the determined work values are assessed
• and assigned collectively to a wage group
Ranking
Gradation
Methods
of quantifi-
cation
Methods of qualitative analysis
Summary Analytical
Job ranking method
Job classification method Points rating method
Ranking method
12 - 9© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Step-by-step Process of Summary and
Analytical Job Evaluation
... the profile
of job
requirements
Derive
2
...the labor
(job
description)
Describe
1
Groups
of remu-
neration,
wage
groups,
salary
groups
...the profile
of job
demands
...the work value
to a...
Value Assign
and
Summary Evaluation
...the extent of
demands per
feature (profile
of job demands)
Determine
... work value
(extent of demands
x
importance)
Assess
...to a
wage group
Assign
Analytical Evaluation
3.1 3.2 3.3
3
12 - 10© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Summary Job Evaluation:
Job Ranking Method
n
...
...
4
3
2
1
Jobs with highest demands
Job with lowest demands
Wage group
Ranking according to
extent of demands
m
...
...
4
Paired comparisons = n (n-1)
2
3
2
1
Wage group with lowest salary
Wage group with highest salary
12 - 11© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Summary Job Evaluation:
Job Classification Method
E1-E4 Employees accomplishing simple activities
E1 Messenger
Kitchen help
E4 Judicial assistant
E5-E8 Completed vocational training in a recognized apprenticeship with corresponding
activities
E6 Childcare worker
Special needs assistant
E7 Occupational therapist
Support worker
Speech therapist
Physiotherapist
E 9-E12 Bachelor degree or completed education at a University of Applied Sciences (Diploma)
with corresponding activities
E 9 Graduated engineer (University of Applied Sciences)
E 11 Teacher at Elementary Schools, Junior High Schools and Middle Schools
Employee at schools without having followed the conventional teacher-training
E13-E15 University degree (Diploma or Master)
E 13 Graduated engineer
Teachers at High Schools
Research assistants and PhD candidates
E 14 Postdoc positions at universities
12 - 12© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation: Requirements Characteristics
According to the Geneva Scheme (modified)
A. Mental
demands
1. work knowledge
2. mental load
B. Physical
demands
3. skills
4. physical load
C. Responsibility for... 5. one’s own work
6. the work of others
7. the safety of others
D. Environmental
influences
8. dirt (oil, grease, dust)
9. temperature
10. wetness
11. gas, vapors
12. noise, vibration
13. glare, lack of light
14. risk of cold
15. risk of accident
16. awkward protective clothing
12 - 13© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation: Ranking Method -
Evaluation Scale for Mental Load (examples)
REFA-
Rangplatz
100
95
90
85
80 Iron extraction plant
75 Field service steel construction
70 Mounting an analytical balance
machine
65 Driving a truck, doing preparatory
work, steel construction
60 Mounting electrical equipment to
crane
55 Producing cutting tools, engine
fitting
50 Driving an overhead crane,
carpentering
REFA-
Rangplatz
45 Working as a pipe locksmith,
operating-electrician
40 Preparing lunch, setting up the
press
35 Twisting the spur gears
30 Insulation work
25 Driving the pushcart
20 Polishing the cast, supervising
the transfer line
15 Painting work
10 Filling phials
5
0
Shoveling sand,
street sweeping
12 - 14© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation:
Ranking Method - Procedure (1)
work knowledge 20 x 1 = 20
mental load 20 x 0.8 = 16
skillfulness 35 x 0.9 = 32
physical load 70 x 0.8 = 56
responsibility 20 x 0.8 = 16
environment influences 70 x 0.3 = 21
Ranking Weights Value
Work value 161 Pts.
assessment
code accepted
Determination
of the extent of
demands
Description of work (job description)1
Rank2
Assess/weight3
work knowledge 20
mental load 20
skillfulness 35
physical load 70
responsibility 20
environment influences 70
Ranking in the
REFA-Rank row
(Ranking 0...100)
12 - 15© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation:
Ranking Method - Procedure (2)
4 Tariff
wage€/h
1 2 3 4 5 6 7 8
30 60 90 120 150 180 210 240
work valuepoints
wage group
Work value: 161 Points
12 - 16© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Tendencies of Job Evaluation
Job evaluation according to wage scale
Basis: Geneva Scheme from 1950
A Mental demands
B Physical demands
C Responsibility
D Environmental influences
Current requirement types
• Entgeltrahmenabkommen (ERA)
• “proficiency”
• “action and decision making
room for maneuver”
• “cooperation” and
• “employee management”
• Flexible work capability
• Takeover of service jobs
• Constant qualification upgrading
...
12 - 17© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation: Rank
value procedure example (1)
Requ.
Characteri
stics
Evaluation levels for work task Point value
1 Work tasks with a proficiency that can be acquired through up
to 1 week of training.
6
2 Work tasks with a proficiency that can be acquired in less than
4 weeks of training.
12
3 Work tasks with a proficiency that can be acquired after at
least 4 weeks of training.
18
4 Work tasks with a proficiency that can be acquired after at
least 3 months of training.
25
5 Work tasks with a proficiency that can be acquired after at
least 6 months of training.
32
6 Work tasks with a proficiency that can be acquired after at
least 1 year of training.
40
Pro
fic
ien
cy
Wo
rk K
no
w-h
ow
12 - 18© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Analytical Job Evaluation: Rank value
procedure example (2)
Requ.
Characteri
stics
Evaluation levels for work task Point value
1 The completion of the work task is predetermined in detail. 2
2 The completion of the work task is extensively
predetermined.
10
3 The completion of the work task is partially predetermined. 18
4 The completion of the work task occurs primarily
independently and largely without guidelines.
30
5 The completion of the work task occurs independently and
largely without guidelines.
40
…
Acti
on
an
d d
ecis
ion
mak
ing
roo
m f
or
man
eu
ver
12 - 19© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Demand-based wage differentiation: Time wage
• Incentive for increases in output is not useful, e.g.
tasks with high risks of accidents
• Output very hard to measure or too elaborate
• Job task = readiness for duty
Area of application
• Remuneration occurs according to length of labor time
Characteristics of time wage
Advantages• Easy to understand wage accounting
• Simple wage accounting (business)
• Constant wage
• Constant wage bill (business)
• No excessive work pace
Disadvantages• Incentive for increased efficiency missing
• Increased efficiency not rewarded
• Variable unit labor costs (business)
Wage
Output per account
period
Higher requirements
Lower requirements
12 - 20© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Performance-based wage differentiation
Variable remuneration according to the performed work
Program
wage
Time wage with
efficiency bonusPiece wage Premium wage
Variable
remuneration according
to expected work
Remuneration based
on performance/
efficiency pay
Bonus Systems
12 - 21© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Performance-based wage differentiation:
Time wage with efficiency bonus
Aim of the performance assessment
• Recognition of particular qualities, e.g. diligence, conscientiousness, versatility
• These qualities are evaluated in comparison with predetermined indicators of performance
Characteristics
Remuneration = basic wage + efficiency bonus
Important performance indicators
• Quality of work performance
• Quantity of the results
• Behavior conforms to the operating instructions
Duration
Time
12 - 22© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Performance-based wage differentiation:
Piece Rate
• Piece rate maturity, i.e., work operation can be arranged according to piece-rate, i.e.,
quantities/times are influenceable and work procedures and methods are known
• Piece rate readiness, i.e., the employee is trained and the work procedures are
designed efficiently, allowing work to be performed without disruption
Area of application
• Remuneration is a monotonically increasing function of the produced quantity
Characteristics of piece rate
Advantages
• Incentive to increase performance
• No risk for the company of decreased
performance by the workforce
• Constant unit costs
Disadvantages
• Excessive work pace
• Danger of increased wear
of the work equipment
• No incentive for cautious work
• Expensive wage accounting
12 - 23© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Piece Wage: Possible function graph
between wage and performance
Wage amount
Quantity per unit of time
Basic wage
Reference quantity
c
a
d
ba) proportional
b) proportional with step
(according to F.W. Taylor)
c) progressive
d) declining
12 - 24© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Premium wage
• Basic premium wage (performance independent) + premium (performance dependent)
• Extent of premium depends on the performance of the laborer
• The curve of the premium is agreed upon by the workers´ council and management.
• Honoring of qualitative and quantitative work performance
• Promotion of special kinds of performances
• A flexible configuration of the wage curve can influence the efficiency
Areas of application:
Performance-based wage differentiation:
Premium Wage
Advantages
• Incentive for performance
• Participation of the employees for output
results (even if piece wages are not
possible)
• The efficiency attitude of the employees
can be influenced through the
configuration of the premium curve
Disadvantages
• Fluctuating premium
• Complex performance determination and
wage accounting
• Wage accounting is not always clear for
the employees
12 - 25© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Basic Structure of the Premium Wage
Highest
premium wage
Basic
premium wage
Wage level
Basic wage
Basic
premium
performance
Highest
premium
performance
Performance result
Premium range
Possible
wage curve
12 - 26© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Types of Premiums
Quantity
related to time
Quantity
related to quantityEquipment usage
time related to time
Quantity premiumQuality premium
• good product
• defective goods
• reworking
• second choice, etc.
Savings premium
• raw material
• supplies
• operating materials
• tool wear
• energy, etc.
Utilization premium
• facility utilization
• downtime
• maintenance
• repairs, etc.
Performance Indicator
12 - 27© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Bonus Systems
- Example: Remuneration of managers-
Success
Secure
Target Income
e.g. manager
receives a bonus if
the companies
growth is >5%Success
Basic Manager Salary
Fixed Portion
e.g. manager
receives a bonus
depending on
marginal return of
sold machines
Bonus as
variable
portion
Basic Manager Salary
Fixed Portion
Minimal Income
Minimal Income
Target Income
Maximum Income
Risk and Chance
Maximum Income
12 - 28© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Bonus Systems
-Example: Remuneration of managers-
•Performance
bonus
•Goal achievement
level of personal
work goals
•Results bonus • Profit
• Cash flow
•Solidarity bonus • Goal achievement
level of collective
work goals
•Rate or returns
bonus
•Strategy bonus
• ROE, ROI, Cash-flow
• Increase in equity
• Achievement of
innovations
• Increase of barriers to
market entry for
competitors
Annual setting of goals
Short-term performance
incentive
Determination of goals
across several years
Good long-term
incentives to behave
entrepreneurially
ROE: return on equity
ROI: return on investment
12 - 29© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Performance-based wage differentiation:
Program Wage
Wage level
Premium( 20%)
Basic wage
( 80%)
(= 100%)
100 110 120Required program time in %
• Requirements of a work plan with a scheduled day of completion.
(e.g., shipbuilding, building industry)
• By overstepping the program time the premium is successively reduced.
• Delivery before the deadline is not remunerated.
Disadvantages
• High requirements for operation scheduling (costs)
• Maximum wage is fixed (for the laborer)
• Personal initiative is not rewarded
• Improves production planning, scheduling
and control
• Improves adherence to the schedule
• The maximum total pay is calculable
Advantages
12 - 30© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Remuneration arrangement for group work
Individual
efficiency bonus
Group premium
Basic
remuneration
Basic
remuneration
Group premium
demand-
oriented
1.System 2.System
performance-
oriented
12 - 31© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Determination of Remuneration
• On the basis of the collective agreement, the works agreement is negotiated
between the negotiation parties.
• Collective wage agreement regulates the minimum requirements.
• Works agreement: supplementary regulation for the appropriation of the
collective bargaining agreement for the enterprise. The amount of wage and
salary and labor time are not to be regulated by the collective agreement.
Negotiation parties: Employer and works council
• The amount of payment and average labor time is negotiated by the bargaining
parties and fixed in a collective agreement. The content of the collective
agreement is legally binding for the people bounded by the collective agreement
(members of the trade union and members of the employers’ association).
• The only reason to differ from the collective agreement is for the benefit of the
employee (e.g. above the general wage scale, extra payments).
Bargaining parties: Employer’s association and trade union
External level
Internal level
12 - 32© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
ERA = Entgeltrahmenabkommen (Metall NRW / IG Metall-Bezirksleitung NRW)
• Constant change is a challenge for businesses in the metalworking
industry: competitive, productive, export-dependent
• High costs and restructuring efforts promote quick adaptations
ERA ...
• no longer distinguishes between workers and employees (non-tariff and tariff),
instead focusing on the task-based requirements of the employee so that there
is no “two-class-society“ in the business.
• links performance remuneration components: effective remuneration is
possible.
• achieves a uniform, comparable, modern job evaluation and an evaluation of
stresses across all employee groups.
• makes possible operational employment flexibility of workers.
ERA – A new collective wage agreement
V12-1ERA
12 - 33© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Agreed upon ERA building blocks....
Four requirement characteristics for the future ERA categorization:
• “proficiency”,
• “action and decision making room for maneuver“,
• “cooperation“ and
• “employee management“
Number of remuneration groups: instead of previous 25 wage, income and
master groups there will be 14 remuneration groups in the future
131 collectively agreed upon level examples as orientation help for the
businesses and the future operational categorization.
Schedule for the operational ERA introduction
System determined and operational cost neutrality through tariff
“security mechanism” (ERA structure components,
ERA adaptation fund, operational “toolbox“)
ERA – Agreed upon building blocks
12 - 34© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University Source: AGV M+E Köln
max. 120
max. 40
ERA – Exemplary evaluation scheme (I)P
rofi
cie
ncy
Te
chnic
al skill
sW
ork
Exp.
Wo
rk K
no
w-h
ow
Action &
decis
ion
makin
g
room
for
maneuver
Nec.
features Evaluation levels for taskPoint
value
1 Work tasks with a proficiency that can be acquired through up to 1 week of training. 6
2 Work tasks with a proficiency that can be acquired in less than 4 weeks of training. 12
3 Work tasks with a proficiency that can be acquired after at least 4 weeks of training. 18
4 Work tasks with a proficiency that can be acquired after at least 3 months of training. 25
5 Work tasks with a proficiency that can be acquired after at least 6 months of training. 32
6 Work tasks with a proficiency that can be acquired after at least 1 year of training. 40
7 Work tasks with a proficiency that can generally be acquired through completed training in a recognized
vocation of at least 2 years mandatory training.
48
8 Work tasks with a proficiency that can generally be acquired through completed training in a recognized
vocation of at least 3 years mandatory training.
58
9 Work tasks with a proficiency that can generally be acquired through completed training in a recognized
vocation of at least 1 year technical training.
69
10 Work tasks with a proficiency that can generally be acquired through completed training in a recognized
vocation of at least 2 years technical training.
81
11 Work tasks with a proficiency that can generally be acquired through completed technical college
schooling.
94
12 Work tasks with a proficiency that can generally be acquired through completed university schooling. 108
1 Work tasks that require at least 1-3 years of work experience in addition to technical skills. 6
2 Work tasks that require more than 3 years of work experience in addition to technical skills. 12
1 The completion of the work task is predetermined in detail. 2
2 The completion of the work task is extensively predetermined. 10
3 The completion of the work task is partially predetermined. 18
4 The completion of the work task occurs primarily independently and largely without guidelines. 30
5 The completion of the work task occurs independently and largely without guidelines 40
12 - 35© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
ERA – Exemplary evaluation scheme (II)
max. 20
max. 20
max. 200P
1 The completion of the work tasks barely requires communication and collaboration. 2
2 The completion of the work tasks requires regular communication and collaboration. 4
3 The completion of the work tasks requires regular communication, collaboration and occasional coordination. 10
4 The completion of the work tasks requires regular communication, collaboration and coordination. 15
5 The completion of the work tasks requires a great amount of communication, collaboration and coordination. 20
1 The completion of work tasks does not require any direction. 0
2 The completion of work tasks requires employees to be technically instructed, guided and supported. 5
3 The completion of work tasks requires employees to be assigned appropriately for goal attainment, to be supported,
encouraged and motivated.
10
4 The completion of work tasks requires the development of goals and for employees to be appropriately assigned, supported,
encouraged and motivated.
20
Co
op
era
tio
nE
mp
loyee
instr
ucti
on
Source: AGV M+E Köln
12 - 36© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
ERA – Remuneration Curve
Remuneration values as of April 1, 2015
Source: Metall NRW
EG 1 EG 2 EG 3 EG 4 EG 5 EG 6 EG 7 EG 8 EG 9 EG 10 EG 11
EG 12
till 36th
month
EG 12
after
36th
month
EG 13
till18th
month
EG 13
after
18th
month
EG 13
after
36th
month
EG 14
till 12th
month
EG 14
after
12th
month
EG 14
after
24th
month
EG 14
after
36th
month
Range
of
points 10-15 16-21 22-28 29-35 36-43 44-54 55-68 69-77 78-88 89-101 102-112 113-128 129-142 143-170
Remu
nerati
on (in
€) 2.454,65 2.484,35 2.512,95 2.552,55 2.605,35 2.673,00 2.757,15 2.900,15 3.134,45 3.445,20 3.862,65 3.980,35 4.421,45 4.448,40 4.709,65 5.232,70 5.053,40 5.369,10 5.685,35 6.317,85
12 - 37© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
Which components of remuneration do you know of?
What are the levels of Maslow’s Pyramid of Needs? Name examples for the
levels!
What is the foundation of job evaluation, which forms do you know of, and how
do the methods of quantification differ?
What is the process of the analytic and summary job evaluation?
Which requirements characteristics can be distinguished from the Geneva
Scheme?
What is the goal of the performance wage/payment by results, and which
remuneration differentiation do you know of here?
What are triggers, basic patterns and building blocks of the new collective wage
agreement (ERA)?
Quick Knowledge Check
12 - 38© Chair and Institute of Industrial Engineering and Ergonomics, RWTH Aachen University
References
Binner, Hartmut F.: Handbuch der prozessorientierten Arbeitsorganisation. Methoden und Werkzeuge zur
Umsetzung. München 2005.
Kappel, Heinz: Organisieren - Führen - Entlohnen mit modernen Instrumenten. Handbuch der
Funktionsbewertung und Mitarbeiterbeurteilung. Zürich 1986.
Maslow, A.: Motivation and personality. New York 1954.
McGregor, D.: Human Side Of Enterprise. 1960.
Schlick, C.; Luczak, H.; Bruder, R.: Arbeitswissenschaft. 3. Auflage. Springer Verlag, Berlin. 2009
Wilke, K. (Hrsg.): Betriebsverfassungsgesetz. Textausgabe mit Wahlordnung. 2008.
www.metallnrw.de
www.agvmetall-koeln.de
www.arbeitswissenschaft.de