Performance Pay Systems in Retail Logistics: Adjusting an Incentive Scheme to Match a Changing Workforce

Warehouses are held to performance level standards through service level agreements with their customers. Most warehouse work involves repetitive, low-skilled and low-paid manual work that can sometimes lead to job-related strain. But labour markets, along with competitive and customer constraints, are tight. One of the biggest concerns of warehouse managers is therefore motivating and retaining their employees. Although at Fast Frock Fashion Logistics, employees are not penalized for not meeting performance targets, they are incentivized through a voluntary performance bonus scheme, REFA, to reach and exceed standard levels of performance. The voluntary programme is itself a source of debate within the company, as the two works councils have differing opinions about its use. One works council believes that supervisors use the system to pressure employees to over-perform, and that the company obtains disproportionately higher benefits from employees' good performance. The other works council believes that without such an incentive system, employees would consistently under-perform, as they are not penalized for doing so. He further believes that the future of the DC and the company itself would be at stake without a performance bonus system. However, management and works councils all agree that the performance indicators need to be revised, as Fast Frock's aging workforce is no longer aligned with the standard employee description on which the performance bonus system is based. Also, in light of the tight labour market and aging workforce, is a performance pay system still the best means of motivating Fast Frock's employees?