Incentive Pay Programs Are a Proven Way to Increase Employee Retention

If you ask any company what is the number one thing they can do to maintain or improve the bottom line, the most likely answer will be make more sales. A close second is often focused on customer satisfaction. But how many companies are putting enough thought and action into employee retention?

Employee turnover is costly and can easily break a business’s bottom line. When an employee leaves, a company loses the time and expense that went into that employee’s on-boarding and training – not to mention valuable knowledge and experience for longer term workers. This can result in the company can suffering a drop-in productivity due to the employee’s absence. Inevitably, they are forced to take on the cost of screening and training a replacement.

According to the Bureau of Labor Statistics, the employee turnover rate in the U.S. is over 25%, and the Work Institute predicts an upward trend that will push turnover rates to 33% in 2020. Based on a recent Gallup article, this high turnover rate costs U.S. businesses $1 trillion dollars a year. To add more pressure to this scenario, employers are struggling to find qualified workers in an uncertain labor market.

Given these numbers, it’s obvious that one of the most important investments a business can make is in employee retention.

One method for increasing worker retention is through the use of incentive pay. Incentive pay is any additional pay awarded to a worker or team based on performance. Incentive-based pay has proven to be particularly effective in warehouse environments, increasing productivity and worker retention by as much as 30%. Other direct benefits include heightened worker morale and increased employer revenue.

The Current Environment

Are you thinking about instituting an incentive pay program for pickers in your warehouse?

Existing incentive programs for distribution centers typically look like this:
• Many companies have incentive programs for their employees based on a combination of criteria.
• Often employees have no idea of how the incentive is calculated.
• Over time, the incentive program becomes outdated and needs to be updated.
• Management is understandably hesitant to touch the plan and years go by with no updates.

ProCat has developed a Pay-For-Performance solution that helps distribution centers improve productivity by providing incentive-based pay to pickers. Named IncentRight, the solution is highly configurable with options to customize target levels, incentive pay levels, and productivity adjustments.

It is easy to implement, easy to use, and easy to understand how incentives are derived. If pickers meet their pick area target levels, they get an incentive. When pickers hit higher targets, they get higher incentives.

IncentRight is built on ProCat’s flagship order picking solution, PickRight, which ensures a 99.9% order pick accuracy rate. A robust reporting suite is included to help management and payroll monitor program incentives. Even though pickers are picking faster and are more productive through incentive-based pay, PickRight’s technology guarantees order accuracy will not suffer.