COMPENSATIO

N
TOYOTA OVERVIEW

 HQ
 Toyota, Japan

 Industry
 Auto Manufacturing
 Size
 5000+ Employees, $204B+ Revenue
 NYSE
 TM
 Competitors
 Ford Motor, General Motors, Honda
 Website
 www.toyota.co.jp
 AIM IS TO IMPLEMENT
LEAN – COMPENSATION
 Have a well defined group compensation system in
place before implementation.
 Pay system has to achieve behavioral changes that
impact bottom line business results.
 Manage new pay system.
 Include indirects in your compensation scheme.
 Set non-monetary reward systems as well.
 Toyota Integrated Medical Management
Toyota’s Health/ Wellness Vision:
Integration, Occupational Health & Benefit

Old Vision

Occupational
Health Personal Health

*Safety/Medical *Benefits Group

Group

New Vision
Total
Health/Wellness
Care
*Health/Wellness
Group
 IT’S OLD SYSTEM - THE PRODUCTIVITY BONUS
BASED ON GROUP LEVEL

 Under toyota’s wage system, productivity bonuses

constitute half of a worker’s monthly salary, and although it
is called a “bonus” it is in reality part of the standard wages.
This bonus thus reflects an assessment of the worker’s
performance.
 Toyota calculates the productivity of each section every
month, and this becomes the raw data for the bonuses.
 The calculation are so complicated that even the managers
don’t understand these figures
 This system was very effective in forcing each other group
to compete against other
 An employee pay is depended on productivity of his section
 HOW DID THEY CALCULATE PRODUCTIVITY OF
WHITE COLLAR WORKERS?
 The productivity rate is broken down all the way
to the shop-floor level.
 i.e. each team is forced into competition to
raise its rate. That’s the secret of toyota’s rising
productivity.
 The important factor in rising productivity is:
 two separate teams share one assemblyline, one
during the day & other at night. Productivity of these
2 groups differ despite fact they use the same
equipment.this reflects an assessment of work
supervisors. The manager with a high rate can show
these numbers to supervisors,who then condemn the
 CHANGING TO NEW PAY SYSTEM……..
INDIVIDUAL LEVEL

 Toyota changed its wage deal:

earlier the productivity bonus traditionally
accounted for 50% to 60% of total salary,
then
It reduced to 40% in 1990.
Again reduced to 20% in 1992.
As a result competition has begun to occur on
individual rather than group level.
 Its new personal merit system served to widen
the gaps between the individuals.
CHANGING TOYOTA’S OLD SYSTEM TO NEW WAGE SYSTEM
 HOW TOYOTA MOTIVATES ITS WORKERS

 i. Agreed to guarantee lifetime employment for employees

 ii. Developed a system of internal promotion

 1. enabled workers to rise within the hierarchy
 a. casual workers could receive permanent contracts
 b. could go on to become team leaders, foremen and even managers.
 2. worker can become a sort of minor manager

 iii. Provides a pay scale based on three components of company

profitability
 1. One bonus based on seniority - not job classification
 2. Another bonus payment related to team’s performance
 3. Additional bonus payment allocated to worker’s merit
 4. Wage would increase from 85% to 115% from amount allocated
 In return, Toyota employees are constantly committed to making
improvements rather than just responding to problem
 Good relationship and team work resulted in
 increased efficiency and a higher level of
production
 a. Many employees hung out after hours
contributing ideas

 about reorganizing and improving production

 Of 860,000 ideas, 94% adopted
BY END OF 2006, TOYOTO WON ON GM BCOZ..

GM had:
 Excessive wage costs for its unionized workers.
 Pension crisis with salaried and unionized retirees.
 Uncompetitive factories with low-quality products.
Toyota had:
 Lower compensation costs due to young work force.
 A weak currency in Japan.
 A lucky break from high oil prices in those years.
As a result:
 Toyota won.
LET’S CHECK OUT PAY OF TOYOTA CANADA INC.
PAY SCALE BY CITY
SALARY VARIES BY STATE
SALARY BY BENEFIT/PERK
SALARY CHANGES WITH
YEARS OF EXPERIENCE
HOURLY RATE BY JOB
SALARY BY GENDER
SALARY VARIATION BY SALES TERRITORY
AUTOMOTIVE ENGINEERS STATISTICS ON
OVERALL INDUSTRY

END YEAR BONUS RECVD


JOB SATISFACTION

AUTOMOTIVE ENGINEERS OVERALL
 PUBLIC MOTOR TRANSPORT- Andhrapradesh

Minimum Wages and VDA payable from 01-10-2010 to 31-03-2011

VDA payable
Sl.No. Category of Employment Basic Wage Total Wage
for 298 points

1 Accountant 4822.00 1564.50 6386.50

2 Heavy Vehicle Driver 4319.00 1564.50 5883.50

3 Checking Inspector 4160.00 1564.50 5724.50

4 Typist/ Contractor/ Clerk 3829.00 1564.50 5393.50

5 Time Keeper 3658.00 1564.50 5222.50

6 Light Vehicle Driver 3435.00 1564.50 4999.50

7 Conductor 3435.00 1564.50 4999.50

8 Computer Operator 3168.00 1564.50 4732.50

9 Cleaner/Security Guard 2645.00 1564.50 4209.50

10 Mazdoor 2645.00 1564.50 4209.50

COMPENSATION CAN FOLLOW….

“Best Practices”

•Incentives not too large.

•pay based on individual performance.
• reduce seniority pay

9-23
 OUR SUGGESTED STRUCTURE TO PAY
EMPLOYEES
Common to all types of jobs
 Basic pay- depend on the class/grade where a employee
is positioned.
 Should be based on:nature of work
 Physical work involved.
 Mental work involved.
 Knowledge & technical skills involved.
 Volume of Duties & responsibilities.
 Nature & no of Task/activities contained.
 Level of Skills to be exhibited in the work
 Burden on employee & complexity of job to do it.
 on par with other Similar org’s pay structure for same job.
 On par with cost of living/money value in that area/country.
 As per latest pay commissions/govt guidelines.