Scanlon Plan.

Scanlon Plan is a gain-sharing plan, a compensation plan based on group performance. There are different Scanlon Plans. Here I show you one. Please be noted that this topic will be tested in the final test. Make sure you know how to do the calculation.

Suppose in 2014, Company X achieved $ 5,000,000 in sales volume (this could also be production volume or revenue). Its wage bill was $ 500,000 (wage bill = labor cost, other costs like overhead costs can be used too). If by the end of 2015, Company X achieves a sales goal of $ 8,000,000 and its wage bill is $ 550,000. What is the gain of labor cost?

If X = the estimated wage bill in 2016, then

5,000,000/500,000=8,000,000/X

X= 800,000

The gain of labor cost = 800,000-550,000 = 250,000

Usually, a large percentage of the labor cost gain will be distributed among employees as a bonus.

Now, try another question.

Question 2: Lets say in 2015, Company Y achieved revenue of $ 10,000,000. Its wage bill was 1,500,000. If by the end of 2016, Company Y achieves revenue of $ 12,000,000. Its wage bill is $ 1,700,000. What is the gain of labor cost?