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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.


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


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


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…


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


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


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


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


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


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


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


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


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)


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


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

...


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


least 3 months of training.

25


least 6 months of training.

32


least 1 year of training.

40

Pro

fic

ien

cy

Wo

rk K

no

w-h

ow


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


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


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


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



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


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


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:


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


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


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


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


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



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


Remuneration arrangement for group work

Individual

efficiency bonus

Group premium

Basic

remuneration

Basic

remuneration

Group premium

demand-

oriented

1.System 2.System

performance-

oriented


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


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


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


vocation of at least 3 years mandatory training.

58


vocation of at least 1 year technical training.

69


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


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


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


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


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

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