Sharing profit among employees
After reducing staff and increasing task load for the remaining employees of the entertainment center, we changed the principles of payroll calculation and motivation in our company.
Before that, the salary of the employer consisted of the following:
- hourly rate multiplied by the total amount of working hours;
- personal bonuses for general sales, high-margin production sales, meeting quality of service and operational activity requirements (individually for every employee);
- collective bonuses for meeting the attendance expectations.
The share of individual and collective bonuses was 10 to 50% of an employer’s payroll. The employers KPI didn’t always reflect the company’s profitability, though. Even while the requirements were being met, and people were getting bonuses and extras, the overall profit wasn’t increasing. Such bonuses have become a thing of luxury for us now.
Three individuals were calculating the KPI of 250 employees: one in the HR department (bonus calculation specialist) and two in the accounts department (material accountant and payroll accountant). We reduced all three, abandoned all the bonuses and introduced a new motivational system: hourly rate + universal share of profit.
Now, 40% of the overall profit is split equally among all the employees. The bonus is the same for everyone. We made staff reduction, excluded the risk of paying untenable bonuses and motivated every employee to work with one universal purpose of increasing profit. The more the company earns, the more money everyone will get. Additionally, the fewer employees there are, the bigger bonuses will go to every single one of those remaining on board.
The reporting system became transparent for every member of the workforce. Once a month, we post the revenue and expenditure budget in our online community. Any employee can inspect it, ask any question, offer suggestions in terms of optimization or cutting of expenses. This has already resulted in the decreasing of expenses.
For example, we used to use taxi services to get our late shift employees back home. At first, we were working with Yandex. Taxi. In a couple of months, expenses had increased from 30 to 70 thousand rubles per month. We took notice of that and switched to the corporate tariff Gett. But the situation repeated itself, although not that promptly. The third idea to reduce expenses came from one of our employees who offered to get his colleagues home in his personal van. As of now, this has been working pretty fine: the employee started earning more, and the company cut another 20 thousand rubles of expenses.
Win-win. The new motivational system benefited linear employees the most, as they received opportunities to directly influence their own payroll. The recipe is simple: work more with Guest, sell more stuff, and you’ll make more money. Members of various departments, on the other hand, lost some of their income, as it had been higher with the old motivational system.
Economy. Prior to these massive changes, the payroll budget was eating 35% of the net revenue. Now, thanks to the new motivational system and other cases of cutting expenses, it has dropped below 30%. This, allow me to remind, in the conditions of the 50% loss of revenue. All in all, we lowered the payroll budget from 7 million to 3 million rubles per month.
Full list of related materials:
- 6 cases on wage fund reduction
- Economy, which improves the service
- Changing the work schedule
- Total reduction. Series of cases on cutting expenses
- Reducing costs for F&B (Food and beverages) purchase
- Reducing costs for the equipment rental and purchase
- Reducing costs for maintenance and administrative expenses
- Ways to increase revenue