Pay-For-Performance Plans for Warehouse Workers

Incentive programs, also known as pay-for-performance plans, have become increasingly common in warehousing and industrial settings, thanks in large part to advances in labor management platforms that allow the measurable tracking of employee performance. Especially at a time when warehouse labor is in short supply, organizations that take advantage of effective pay-for-performance plans can gain an edge in the war for talent, along with other important benefits like improved efficiency, productivity and employee engagement.

At its core, the concept of hourly labor suggests that an individual trade his or her work in exchange for an hourly wage. The hourly wage has been the primary labor arrangement in the United States since the industrial revolution.

A criticism of hourly wage labor has been that it fosters adherence to method and process and contributes to a culture whereby employees are treated the same rather than a culture of creativity and action, and thus employees are often motivated to accomplish only what is minimally acceptable for their job.

Some professions, however, have developed on the basis of incentives. Salespeople, for example, are often paid via commission, and therefore have built-in incentive to produce more. Likewise, service industry employees, such as waiters or servers, are driven to performance by the incentive of greater tips and gratuities.

The idea of incentivized motivation for other employees isn’t new. Bonus structures have been around for ages and often have a profitability component to them, but some jobs simply don’t fit well into traditional bonus programs. Warehousing and industrial enterprises are one example. Offering bonuses tied to profit to production-level employees can have little impact on their productivity because most factors that influence profitability remain outside control of those workers.

However, when it comes to industry and warehousing, what you can measure, you can improve. Especially since the advent of data-driven labor management programs, production-level employees have become ripe for incentive programs, and using them makes practical sense in an era where dynamic retail is rewriting the distribution playbook.

Smartly developed pay-for-performance programs (PPP) can provide multiple benefits to both employee and employer, including cost savings, quality increases, reduced error rates and higher worker satisfaction – which has become of paramount importance in a labor market staring down a shortage of warehousing workers.

In this paper, we will first examine the current labor situation in warehousing. Then, we’ll explore what can be incentivized for warehouse employees before discussing important first steps to planning a pay-for-performance plan, followed by central elements that characterize a good pay-for-performance. Finally, we’ll conclude with the all-important benefits that come from implementing a quality, effective warehousing incentive plan.

Read the full White Paper here.