EXAMPLE OF AN CSW REWARD PLAN

(This is a fictional example and does not apply to any Factory)

Purchases of materials and consumables of £300,000 per month are converted to sales of £1,000,000
per month, by adding value of £700,000 per month, i.e.

Sales = 1,000,000

Materials and Consumables = 300,000

Added Value = 700,000

This is how wealth is created.

It is consumed as follows:

Employment Cost = 560,000

Overheads = 200,000

Profit / (Loss) = (60,000)

700,000
Added Value =

Now an CSW Reward Plan might be based on the above results. The ratio of employment cost to
added value
£560,000
= = 0.8 or 80% or 80p in the £
£700,000

In future, in any month, the added value will be multiplied by 0.8 to give a target employment cost.
The actual employment cost will be subtracted from this, and the difference if positive, shared.

For example:

If sales, materials and consumables, and added value are all increased by 50% i.e

Sales = 1,500,000

Materials and Consumables = 450,000

Added Value = 1,050,000

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Example of an CSW Reward Plan (continued)

Then the target employment cost = 0.8 X £1,050,000 i.e £840,000

If the employees have produced the increase

in sales and added value with no increase in = £560,000
employment cost then employment cost

And the difference = £280,000

The employees share of the bonus is, say, half of this i.e. £140,000

The bonus expressed as a percentage of employment cost is

£140,000
x 100% i.e 25%
£560,000

As a percentage of gross pay, this would be about 30%.

The company would also gain £140,000 plus 20% of the increased added value of £350,000 i.e.
£70,000, thus changing the loss of £60,000 into a profit of £150,000, before tax.

i.e Employment Cost = £560,000

140,000 bonus

Overheads 200,000

Profit 150,000

£1,050,000