Incentive Plan

System

We are planning to start an employee incentive plan.
We'd like to offer employees a percentage of savings
if they recommend cost-cutting ideas. In other words,
maybe 10% of the total savings. I'm looking for ideas
on how to structure the plan regarding limits to pay-outs,
written guidelines, , etc. Any help would be appreciated.

Theresa Gegen TX

I think it is a great idea, but I would put some limits on the amount the employee can recoup. There is one case that I know of that involved such an incentive plan. An employee made a suggestion, which was implemented by the company and resulted in millions of dollars of cost savings. The company did not pay the employee because the company claimed that the suggestion was not a new idea and had been discussed in management before the employee ever made the suggestion.

The employee then sued for breach of contract and won several million dollars from the jury.

This is a Texas case so it is very relevant to what you want to do. (The defendant was an East Texas employer).

You can see the problem here. Sometimes a simple and even obvious change can result in millions of dollars of cost savings. But is the employer really willing to be on the hook for 10% of up to lots of money.

I would have any plan reviewed by legal counsel with this case in mind.

Good Luck!