Reward systems based on productivity

For workers in tea plantations:

Dr. N. Yogaratnam Chairman, Tree Crops Agro Consultants

Profitability and productivity of an industry always becomes key issues, whenever worker wages are discussed, inflation takes a back seat. Tea industry is no exception. This article examines the concept of, productivity - linked wages or in other words "Reward systems and worker productivity", as numerous debates have emerged around this concept in tea business.

Conventional plucking

Five pruners at Rs 300 for one day	 	Rs 1,500 
Standard task to be fulfilled 200 bushes x 	5 1,000 bushes 
Task actually completed 			1,400 bushes 
Percentage increase over standard 		40 percent 
Incentive payable at 40 percent of the time-rate wage Rs.600 
				(to be shared by five workers).

Among the operations in tea plantations, which lend themselves to a productivity- based approach in the matter of wages and incentive systems is, plucking. Apart from being the most costly component of production, plucking has the advantage that the output of pluckers can easily be measured for the calculation of payment. Once the concept of productivity-linked rewards is accepted, implemented and perfected, it could be extended to other operations. A productivity approach for pluckers cannot, however, be successfully implemented in isolation; it has to be part of a wider package involving a parallel development of the field to generate a bigger crop, thus facilitating its handling by the worker.

Agronomic considerations

Some of the field-level prerequisites for bigger crop are: Improving soil fertility, Modifying the micro-climate, Maximizing the yield, Choosing planting material, Ensuring more pluckable shoots; Rationalizing and predicting plucking intervals, to facilitate advance planning and deployment of workers; for instance, temperature data are used to predict the time taken for the expansion of a leaf in crop shoots and hence to determine plucking intervals - this concept is called the leaf expansion time (LET) and involves dividing cumulated daytime temperature during the expansion of a leaf by the cumulated temperature in a day during a given season.

Also, following a management approach to pruning, will reduce the "come-back" period to plucking; enable pruning to be undertaken during periods of reduced plucking activity; ensure that product consistency - an important marketing consideration - is not at risk because of pruning a smaller area of one or more varieties; time the activity with an eye on the market - as noted above, it would be a retrograde step if pruning were to reduce the quantity and quality of tea available for sale at a time of high demand and remunerative prices.

Training the plucking surface -for plucker efficiency and Integrating plucker intake with field responsiveness are beneficial.

For instance, a plucker assigned to a recently pruned field will, despite the best of efforts, be unable to harvest the quantity plucked by another plucker entrusted with a second or third year field, there is thus a need to maintain morale by giving pluckers a fair mix of fields; another reported feature is that a plucker repeatedly assigned a given set of fields will look after the bushes with greater care and attention, although the time spent in the process could even be the expense of the extra gain in crop.

Worker acceptance

Having prepared the field to facilitate the introduction of a productivity-linked wage system, the next step is to secure the cooperation and agreement of the workers. Experience has shown that the key factors in this regard are: the simplicity of the scheme; its ease of implementation; evident fairness to both parties; and ensuring a speedy reward.

Indian experience

A brief description of the experience of a productivity incentive scheme for tea pluckers in South India may be useful at this juncture to serve as a guide for similar schemes in Sri Lanka.

Initially, tea pluckers were paid a fixed daily wage plus a cost-of-living allowance (revised every quarter, based on published index numbers). In return, they had to harvest a minimum quantity of green leaf per day.

For any excess quantity harvested above the norm, they were paid a plucking incentive.

This was a constant amount per kilogram of leaf but, in due course, the system was refined by having two incentive slabs (categories). The general feeling among the management was that the incentive scheme was defective in that the minimum quantity was the same in both the high and lean cropping months, and that the rate of incentive was not attractive to the worker.

Accordingly, after collecting monthly data, going back ten years, from over 100 estates, in regard to yields and plucking averages, a scheme was formulated by the Association of Planters and taken up for internal consideration among its members. Several of them had reservations on the grounds that managements who adopted long plucking intervals and were thus able to achieve higher plucking averages, would stand to lose by the scheme. In the light of comments and suggestions, the minimum quantity of leaf to be plucked as well as the incentive slabs and rates were modified, and a compromise was reached within the management camp, it being evident from the calculations that all managements would stand to gain from the proposed incentive system.

The essence of the scheme is that tea estates are classified into four categories depending on the green leaf yield for the month, (1) 1-400; (2) 401-800;(3) 801-1600 and (4) 1600+ , kg green leaf per month.

The base output to be plucked per day and the incentive slabs and rates are different for the four classes. The same scheme is applicable both to hand plucking and to plucking with shears, thereby securing acceptance of the use of tools without payment of a differential wage. The scheme comprised the following aspects:

* The green leaf yield was worked out by dividing the field weight of green leaf plucked for the month for the estate by the total area of mature tea; the area would include the pruned/skiffed area as well as the area under "tipping".

* Green leaf yield per hectare was rounded off to the nearest kilogram.

* The base output was not the task as such but only the indicator above which the incentive wage was to calculated; all pluckers were expected to work normally and diligently for a full day and harvest the maximum output.

* On the first working day of each month, the management displayed on the muster notice boards an indication of the probable Base Output applicable for the month, having regard to the yield of the same month in the previous year and the weather conditions, favourable or otherwise. The management could alter the indicated base output at any time during the course of the month or at the close of the month, to take account of changes in the cropping pattern.

* For calculating the month's yield, any crop plucked on holidays was excluded.

* A joint implementation committee comprising representatives of the employers and workers was appointed to oversee the implementation of the scheme and to examine worker's grievances concerning the correctness of the yield and other parameters.

Incentive structure

The negotiated incentive scheme for tea pluckers based on productivity indicated that the base output per day for category 1 (1-400 kg) was 12 kg and the incentive slabs were ; 13-15, 16-30 and 31+ kg for the 1st , 2nd and 3rd slab respectively. On the other hand, the base output per day for category 4 ( 1600+ kg) was 16 kg and the incentive slabs were, 17-35, 36-60 and 61+ kg for the 1st , 2nd and 3rd slabs respectively. The other too categories fell within these two limits. The incentive rates paid when this scheme was first introduced were, Indian Rs 0.27, 0.35 and 0.40 for the 1st, 2nd and 3rd slabs, respectively. These incentive rates, however, require up-dating .In Sri Lanka, the productivity-linked wages now stand at Rs. 30 of the total wage of Rs. 405.

An evaluation of the scheme indicated that it has been implemented with fairness and transparency and, in the process, has gained credibility in the eyes of the trade unions. The existence of a grievance redressal process has added to the successful working of the scheme. Both management and workers have gained, albeit to a different extent. According to one estimate - which was from a highly productive and well-managed group - a combination of programmed plucking based on leaf expansion time (LET), selective use of shear harvesters and the adoption of the new incentive system has led to a 36 percent improvement in the plucking average over a five year period, since the scheme has been in operation.

It is also reported by the same group that, as a consequence, 10 percent of the total leaf harvested came from pluckers in the 50 kg plus slab. In terms of incentive earnings, the benefit to pluckers during the five-year period had gone up by 25 percent.

Deficiencies

It is important to point out, however, that workers share was a lower proportion of productivity gains under the scheme. This perception existed among some of the trade unions and a demand for a larger share for labour was raised.

It is also important to draw attention to a tactic that labour might adopt. If all the workers were to act in concert and pluck just above the minimum specified quantity, management would have to employ temporary labour to harvest all the available leaf, especially during the high cropping periods.

If yields were to increase, more permanent workers would have to be pressed into employment.

Paradoxically, estates are finding it difficult to recruit the required labour force. Possible reasons are the reluctance to take on hard physical work, the spread of education, and migration to cities in pursuit of higher wages and better living standards. In such a situation, workers see the new incentive scheme as an opportunity rather than a threat and have not resisted it.

Productivity measurements

Two questions arise. First, how is the gain in productivity measured? A simple approach is as follows. Calculate the workdays (and hence, the wages, suitably adjusted for the associated welfare costs, both capital and revenue) assuming labour productivity at the previous level.

Deduct from them the actual workdays (and the actual wages, again adjusted for the associated welfare costs). The difference is taken to be the gain in productivity.

As is well known, not all the leaf available on the bush is harvested.

Under the incentive scheme, there is a better chance that the plucker will harvest the leaf morefully. In other words, the yield will include leaf which would ordinarily not have been plucked.

For a true valuation of productivity gain, it would be necessary to add the value of the extra leaf harvested. As estimation of the extra leaf is largely a matter of conjecture, this is not taken into account.

Second, what is a fair share of productivity gain for labour? This again is a matter of opinion and the share accorded to workers in practice depends on the relative bargaining strengths of management and labour.

Several productivity agreements have been in practise in the region (in manufacturing industries) on the basis of labour getting a sizeable share of the gains from productivity improvement, sometimes as much as 60 per cent. That figure seems to be a fair limit.

Mechanical or shear harvesting

Looking ahead, a shortage of plucking labour is bound to continue with more seriousness in Sri Lanka.

At present, such a shortage exists mainly during the heavy cropping period both in the estate sector and in smallholdings. The resultant unplucked green leaf implies not only a loss of revenue to the producer but also to the nation, bearing in mind that every unsold kilogram of black tea (the equivalent of 4.5 kg of unplucked leaf) means a loss of potential foreign exchange of the order of US$3.00.

To prevent such a loss, it is advisable to make selective use of shear harvesters during the rush season; this is already being done in on limited scale in Sri Lanka. The industry's fear is that widespread application of shear harvesting would be detrimental to quality. While this is admittedly a valid consideration, a trade-off has to be established between quality and allowing the harvest to go unplucked.

Furthermore, one aspect which is invariably overlooked is that the limited use of shear harvesters will improve worker output and reduce costs to the management.

Another is that male workers in Sri Lanka who have hitherto viewed plucking as lacking in job enrichment (unlike their counterparts in East Africa), are now reportedly inclined to venture into plucking so long as it involves a combination of quasi-mechanical activity and higher earnings, which the use of the shear entails.

It is, perhaps, appropriate for Sri Lanka to venture into large-scale mechanical plucking, which has worked satisfactorily in Japan, Australia and South Africa but not so successfully in Papua New Guinea and Uganda.

Other field activities

In the debate on field productivity improvements, the overwhelming emphasis has been on plucking, so much so that other operations where such gains are necessary and achievable tend to be neglected. One possible approach is to develop a group incentive scheme, the concept being that, in a given operation, for a certain percentage of output above the standard, the corresponding percentage of extra wages would be paid as incentives.

These incentive payments would be shared by the individuals in the group, either equally or on a pro rata basis.

A hypothetical example (arbitrary rates used) will clarify the working of such a group incentive scheme. Take, for instance, the case of pruning where the standard daily task is fixed, say, at 200 bushes.

Suppose that this is equivalent to a time-rate wage of Rs. 300. A field of 1,400 bushes is to be pruned and the work is assigned to a group of five pruners who complete the work in one day. The incentive payable to them is given in table 1.

Working at the standard task rate, the same number of pruners would have taken about one-and-a-half days to prune 1,400 bushes, resulting in a wage payment of Rs. 2,250. Because of their improved productivity, the management will be able to effect a saving of Rs 750 in wage payments and the workers will be able to earn an incentive of Rs 600.

A group incentive scheme thus offers a monetary inducement to a group of workers voluntarily to enhance their productivity within prescribed work norms. This approach can be extended to all task-related operations, such as spraying, fertilizing, shade regulation, weeding, leaf loading etc.

The advantages of this concept are: that field operations planned for the year or season can be completed economically and rapidly, so that labour (particularly men workers) can be deployed for plucking during the heavy cropping season; that the recruitment of casual workers can be avoided; that production costs can be controlled; and that a better team spirit and level of responsibility is encouraged.

In conclusion, it is emphasized that a productivity based reward system for pluckers cannot, however, be successfully implemented in isolation, it has to be part if a wider package involving a parallel development of the field to generate a bigger crop for the system to be fair by the workers.

Also, it is crucial that a tripartite wage arrangement, involving the employers, workers (trade unions) and the Labour Department (Government) is negotiated, for the agreement to be recognized as a formal settlement, as is being done in the plantation sectors elsewhere.