Bonus systems in mining industry. Current situation and future developments

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Tom 24 2008 Zeszyt 4/2

MARIA SIERPIÑSKA*, ARKADIUSZ KUSTRA*

Bonus systems in mining industry. Current situation and future developments

Introduction

One of the crucial elements of motivation systems are bonuses and prizes. Bonus is a part of a remuneration, granted to an employee as an additional part of the main wage/salary. The employee acquires the right to receive it when he or she meets defined conditions. Rules and regulations of granting bonuses should be set precisely in documents covering this matter.

These are very often appendixes to the general rules of negotiated common rules of employment or code of remuneration. The main incentive when using a bonus is streng- thening motivation of employees to meet certain goals, most often defined in the short run.

From the employer point of view, a bonus is a very convenient form of remuneration, since it creates interest among employees to improve results. In addition it increases flexibility of the remuneration system and allows for diversification and periodic adjustments of assignments and indicators used to measure effects, according to company’s needs.

Aside from the mentioned advantages, bonus system facilitates, supports and leads to conforming with corporate strategy. Due to creating a bonus system, most desired employees’ actions for achieving strategic goals are additionally remunerated. Bonuses must be dependant on obtained results. Every employee must know what is the category that is earning him (or her) the additional money and what behavior, and what kind of work effort are important for the top managers. With all these role model elements in mind, bonus systems in mining industry were evaluated. The outcomes of this evaluation were used for preparing a proposal of redesigning bonus systems in mining industry. The emphasis was

* Department of Economics and Management in Industry – AGH University of Science and Technology, Kraków, Poland.

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placed on basis for granting a bonus, criteria and indicators used to measure results of work and methods of relating evaluations with bonus levels and rules for paying it to an employee.

Evaluation of bonus systems present at mining companies

A bonus represents a variable element of a remuneration that plays crucial role in motivating employees. Most often this element is in bigger extent related with efficiency of work. Too many parts of a remuneration in mining industry companies result in insignificant role of a bonus, when motivation is considered. The bonus represents only several percent of the total remuneration. In addition, in coal mining industry a common form of remuneration is a performance-based one. This can be found in many versions. In the most important processes involved in coal production this from of remuneration based on the quantity mined has a dominant importance. All line employees working underground and on the ground, for which it is possible to precisely set quantitative assignments and measure the realization, are remunerated according to this form. This is the reason why a bonus, especially for line workers depends on the form of remuneration for the work done, everywhere where quantitative (very seldom qualitative) setting assignments (or norms) and executing these assignments is difficult or impossible to implement. Table 1 presents a structure of remuneration of employees at coal mining companies from 2004 to 2007.

TABLE 1 Structure of remuneration of coal mining companies employees from 2004 to 2007 [%]

TABELA 1 Struktura wynagrodzeñ pracowników w kopalniach wêgla kamiennego w latach 2004–2007 [%]

Item 2004 2005 2006 2007

1. Basic wage 2. Performance surplus 3. Bonuses and prizes

4. Supl. for overtime on weekdays

5. Supl. for overtime on weekends and holidays 6. Other supplements

7. Total for time at work 8. Remun. for vacations 10. Sickness leave pay 11. Miner’s card 12. Deputats

13. Other remuneration 14. Prizes out of profits 15. Total remuneration

24.53 5.30 9.22 0.02 1.46 5.03 45.56 8.81 2.41 16.00 5.18 22.04 0.00 100.00

25.99 3.36 8.16 0.02 1.55 4.98 44.06 9.65 2.61 16.42 4.92 20.82 1.52 100.00

25.72 3.52 7.48 0.03 1.57 5.41 43.73 10.00 2.64 16.14 4.64 21.99 0.86 100.00

25.87 3.45 7.70 0.03 1.58 5.37 44.00 10.25 2.47 16.31 4.59 21.65 0.73 100.00 Source: Authors on the basis of a research grant No. 4T12A00527 financed by the Ministerstwo Nauki i Szkolnictwa Wy¿szego.

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The structure was not evolving in the period covered by the study. There are only insignificant moves between some of the elements. Over these years, the remuneration systems in mining industry did not change, despite the structure of remuneration is criticized for many years by managers and external experts. It does not represent any motivating features, because about half of the total wage is not related to the time actually worked. In 2007 only 44% of the remuneration was related to the actual work done. The other elements of remuneration are of discretionary nature. Bonuses represent on average from 7% to almost 10% of each employee money earned and in our opinion these should stand for from 15% to 20% share in the total remuneration. The shares of bonus in total remuneration in distinctive groups of workers at mines are presented in Table 2.

TABLE 2 Share of bonus and prizes in total remuneration in the period 2004–2007

TABELA 2 Udzia³ premii i nagród w wynagrodzeniach ogó³em w latach 2004–2007

Item 2004 2005 2006 2007

Share of bonuses and prizes in remuneration of line workers:

– rulebook bonus – additional bonus – other bonuses

8.58 7.01 1.13 0.43

7.48 5.61 1.26 0.61

6.72 6.04 0.45 0.24

6.98 6.28 0.51 0.19 Share of bonuses and prizes in remuneration

of engineers and technicians:

11.61 10.33 0.92 0.36

10.63 9.15 1.00 0.48

10.17 9.62 0.36 0.19

10.42 9.78 0.42 0.12 Share of bonuses and prizes in remuneration

of mine workers, on average:

9.22 7.71 1.09 0.42

8.16 6.36 1.21 0.59

7.48 6.81 0.43 0.23

7.70 6.91 0.52 0.27 Source: Authors, on the basis of a research grant No. 4T12A00527 financed by the Ministerstwo Nauki i Szkolnictwa Wy¿szego.

In mining companies one uses rules for setting and granting bonuses for all groups of workers covered by the bonus form of remuneration. As a result, there are no main nor additional aims for purposes of granting bonuses to all employees. Rules for setting bonuses were delegated to particular organizational units (mines and workshops). This is especially relevant for line workers and lower-level supervision managers. This approach is not however beneficial for shaping corporate-wide responsibility attitude of employees. Imple- menting bonuses resulting from meeting the goals of an organizational unit creates no incentives for thinking about the whole company well-being.

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A bonus is a derivative of the main wage/salary, that in mining industry oscillates around 15–50% of the total remuneration. The lowest level of a bonus in relation to the main part of a wage is present in a group of line workers. The bonus ratio, defined as the relation of a bonus to the main part of a wage is presented in Table 3. The share of bonus in the main part of a wage in Kompania Wêglowa is much lower than in Jastrzêbska Spólka Wêglowa and Katowicki Holding Wêglowy. This is true for all groups of employees.

TABLE 3 Bonus ratio in mining companies (JSW, KHW, KW) in the period 2004–2007

TABELA 3 Relacja premii do p³acy zasadniczejw spó³kach górniczych w latach 2004 do 2007

Group of employees: 2004 2005 2006 2007

Line workers

JSW 43.1 42.2 42.2 42.9

KHW 39.0 40.9 41.9 42.6

KW 25.9 13.9 16.2 17.8

Working underground

JSW 44.3 43.4 43.5 43.6

KHW 36.1 38.0 39.0 39.7

KW 25.6 13.6 15.7 16.9

Engineers and technicians

JSW 40.8 40.0 38.5 39.4

KHW 49.7 50.3 51.8 52.3

KW 27.5 19.6 21.7 22.4

Mine workers on average

JSW 41.1 40.3 40.0 40.7

KHW 41.2 42.8 44.1 44.8

KW 26.2 15.3 17.5 18.7

Source: Authors, on the basis of a research grant No. 4T12A00527 financed by the Ministerstwo Nauki i Szkolnictwa Wy¿szego.

Bonuses for line workers’ jobs are most frequently their monthly component of the wages paid in accordance to the rulebook of rewarding. Rules of awarding a bonus are usually drafted for a longer period of time and on the basis of such drafted rules bonuses are being given, however, the short–term assignments may be different each time. Instances of being refused a bonus are usually connected with the violations of safety regulations, lack of discipline, unjustified absence from work or some other law infringement.

Engineering and supervision personnel gets similar bonuses as the simple line workers (Tab. 3). It might be supposed that the supervision personnel should be motivated by a much higher bonus proportionate their basic salary. On the other hand, greater authority already inherent to the workers from a higher rank in management hierarchy may adversely affect safety at workplace, considering the situation where ordinary workers are motivated by

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bonuses coming directly from output. Therefore, motivational regulations should be entirely different for the management and for the ordinary workers.

Since in this branch of industry there has not been any work evaluation for a very long time, the basic pay and the tables of pay rates are shaped rather haphazardly. Thus the level of bonuses for the group of the engineering personnel is more a result of some remuneration policy and of maintaining proper relationship between the chief and the subordinate than a real need to motivate the supervision staff by means of bonuses.

The engineering personnel is more inclined to care about the prospects for promotion whereas ordinary workers are less likely to be interested in getting to a higher rank in management hierarchy.

Some mining companies motivate their highest rank management workers according to different rewarding rules.¹ These rules are connected with economic indicators, improvement of the work performance, etc. In this respect regulations in two different mining companies were analyzed. In one of the companies the directors of the coal mines and their deputies are entitled to a bonus after realization of certain assignments which are subject to rewards. It constitutes the sum of partial bonuses for the performing cleared every quarter on the accruing account in relation to the assignments specified in the techno-economic plan. In order to calculate the amount of partial bonuses, a unit coal production cost was assumed and the remaining assignments were specified by company management. The partial bonus for the completion of the assignment within the range of a unit coal production cost equals 30%

of the flat-rate remuneration allowed per quarter for which the assessment is being performed. Single unit coal production cost depends on the amount of coal production, hence in case of achieving the output different from the one which was planned, the unit production cost [which was drafted] is corrected by 50% of the unit cost for each ton of difference in output. Specific procedure of correcting the unit coal production cost is specified in the company’s motivational rulebook². The extent to which the assignment is fulfilled is the ratio of the unit performed divided by the unit cost corrected by a percentage of the task completion. Each time when the unit coal production cost is lower by 0.1%, one is entitled to a 2% bonus, and each time it exceeds the unit coal production cost by more than 0.1%, the bonus is by 2% lower. Total partial bonus from achieving the assignment within the scope of a single unit coal production cost cannot exceed 60% of the flat rate remuneration due within the quarter.

Partial bonus from achieving the remaining assignments given by the management equals up to 8% of the flat rate due within the quarter. These tasks are to show the current performance of the coal mines and the internal organizational units and are each time defined by the company’s Management. One may find a rather surprising statement in the rulebook of rewarding: “a bonus may be given to a worker who fulfills his/hers assignments resulting from his/hers business duties”. Such duties are just a condition of being employed and they shouldn’t serve as a basis for a bonus.

1 With the exception to the company management, which functions according to some other statutory laws.

2 The company management wished to keep its name secret.

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In the second of the mining companies analyzed there are following bonus-earning assignments and scopes of partial indicators:

1) unit production cost of salable coal [z³/t] 0.0–15.0%, 2) results of other operating activities [z³] 0.0–3.0%, 3) coal production assignment fulfillment [t] 0.0–6.0%, 4) quality of the raw coaldust [kg/t] 0.0–6.0%.

Below are the parameters for the assessment of the bonus assignments and the range of indicators given to the specialized organizational units:

1) gross income [z³] 0.0–15.0%,

2) job order cost accounting costs [z³] 0.0–15.0%.

In case of exceeding the unit coal production cost which was drafted beforehand no bonus will be granted. The ratio of the savings of the costs to the cost assigned is called the partial bonus indicator and it should equal 7.5 + 0.36% for each ”penny” saved in proportion to the assignment, yet it should not be more than 15%. The second parameter of rewarding results from the other business activity and is corrected by the costs which are independent of the mine management. The partial bonus indicator equals 6% for completing the coal production assignment, but in case of failing to complete the assignment the volume of this bonus indicator is established individually after the recognition of possible causes for this failure, which might come into existence. The quality of coaldust is the fourth bonus parameter and it is measured by the degree of deviation between the value assigned and the actual value of the coaldust. The partial bonus is graded every 1.2% beginning at the point of its absence at the deviation greater than 1200 kJ/kg up to the complete, 100% volume when this deviation is 0.

The partial bonus indicator equals 15% when the gross financial result goal is achieved or even when it exceeds what was planned.

Direct materials costs indicator is another parameter similarly used. Failing to keep their estimated level results in the absence of a bonus, and fulfilling the estimated level or even achieving a more profitable level results in being given a partial bonus in the maximum amount of 15.0%. The following entry from the rulebook is controversial because it prepares the ground for possible arbitrariness in granting bonuses: ”If failing to achieve any of the assignments is justified, then the bonus indicator for that organizational unit may be granted in the amount higher than the one which results from the rule that the respective items of tangible costs should be kept with up to 1.000 z³ precision” (article 2. Item 7)³. This bonus may be lowered up to its complete absence in case of some gross negligence of one’s duties or putting the company at a risk of losses. Moreover, on the basis of the manager’s proposals or opinions, as well as the motions and opinions of other offices dealing with the assessment of bonus assignments, the management may have their bonus established according to some other rule than the one written in the rulebook. The ultimate amount of the bonus after considering the motions submitted by the managers and headquarter offices assessing the completion of the bonus assignments is set by the President of the board of directors.

3 Motivational rulebook for the management of KW.S.A.

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When considering the rulebook’s entries, one has to pay attention to a different mode of fixing of the assignments for the coal mine managers, which entails the payments of the bonuses for much longer periods of time for the management than for ordinary workers and engineering personnel. This is the result of setting of the assignments which are connected with: volume of production, unit production cost, performance results from the remaining business activities, quality parameters and short-term assignments. They are assignments set with reference to the quarterly periods, which because of the situation of mining industry in Poland, seem reasonable periods for the assessment of the level of completion. Despite the fact that there are some fixed rules which entitle the workers to the bonuses set in the rulebook, an attempt to get rid of exceptions to the rules failed and there are some departures from the rulebook to award a bonus. This situation renders formerly formalized rules ambiguous, that is why no one really knows for what precisely they are being awarded a bonus. Therefore, in case of extraordinary occurrences one should rather suspend the functioning of the rulebook than introduce any elements of dubious criteria.

The above presented examples of awarding managers lead towards the improvement in effectiveness, which is evidenced by the accepted criteria of evaluation. At this level of management such mode of awarding a bonus is justified yet some bonus parameters need to be further specified. They also should be correlated with the range of competence and responsibility of the coal mine managers. After the organizational restructuring of the newly created economic entities, this sphere has not yet been adequately specified.

A proposition of criteria and evaluation measures for bonus systems

Variable part of the remuneration in a form of a bonus should represent around 15–20%

of the total remuneration. It should also reflect the period for which this bonus is granted and employees groups for which it is designed.

In coal mining companies there is a rationale for using a “share formula” when shaping the bonus fund. Division of the bonus fund should be dependant on conducting general and specific assignments. General assignments set for the whole company should deal with its current financial results and implementation of initiatives crucial for its development.

Due to its subject, according to which bonus-bringing assignments are set, one can recognize granting bonuses on the following levels:

— a mining company,

— a mine,

— internal organizational units of a mine (responsibility centers).

Setting goals at the level of a mining company is intended to grant consistency of activities of all employees. Bonus-earning activities set for a company can be delegated directly to mines and indirectly to specific organizational units that are responsibility centers.

These assignments can be defined on the basis of the aggregated results, such as total sales, total income, value added, or be of a qualitative nature, as safety of a workplace and time of

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conducting processes. Granting bonuses based on aggregated work effort should be used at the level of a mining company and a level of a mine. In case of other organizational units, bonuses are granted for part-assignments.

The bonus system must control for a system of an evaluation of assignments com- pletion, for which bonuses are paid out. It is logical to set bonus-earning assignments separately for different responsible centers, such as:

— investment centers (management of a coal mining company),

— revenue centers (sales departments),

— quasi profit centers (top managers of a mine),

— cost centers of basic and supporting activities recognized within a mine (divisions, departments), cost centers for administration activities (administrative departments in a mine and a mining company).

Bonuses for the top managers of a mining company should be granted by the Board of Directors for realization of annually set assignments. As parameters of granting bonuses for top managers one can use indicators that measure meeting the most significant goals, when market position of a company is considered in a given fiscal year. Goals and measures are defined in a Balanced Score Card which is used for operationalizing strategic targets of a company and allows for their realization.

These can be for example:

— achieving a profitability of net sales or rate of the return on equity set in a plan,

— maintaining the planned work effort intensity of preparation actions for a given year,

— maintaining market share,

— conducting planned investments,

— restructuring employment, etc.

The optimal number of indicators used for bonus purposes should not exceed 5.

After recognizing the degree of completion of assignments set out in an annual techno- -economic plan, the management can receive the full amount of the bonus. Deviations from the extent of assignment realization should be maintained in an area of border deviations. For example, deviations of ± 3% do not influence the bonus paid out. Negative deviations, outside this margin decrease the nominal value of a bonus gradually to zero. Results that exceed the planned ones may lead to increase in the bonus. However this increase in the bonus should be lower, than the extent of exceeding bonus-earning assignments results. It will stabilize the propensity of managers to underestimate planned assignments in order to receive additional financial benefits.

Bonuses for administrative workers of the company’s headquarters can be paid out every quarter and should be driven by the degree of realization of the techno-economical plan. Their amount should be dependant on the level of bonuses for production workers and should oscillate at 60% of bonuses for line production workers.

Bonuses for directors of divisions should have the same basis, as for all employees of a given division and can be paid out quarterly.

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One can assume that a mine will be a quasi profit center in a controlling structure. Bonus fund for mines can be defined as a percent of the gross margin generated. For mines one can set an outcome for which the top manager is responsible.

Coal sales proceeds

— variable costs

= gross margin I,

— other costs controlled by a director of a mine

= gross margin II.

In order to set the share of the bonus in the gross margin on sales II for a mine, one have to divide the bonuses paid out so far by the margin generated in the current period. This way the historical share will be recognized. It can be increased, if the management is representing a will to strengthen the role of a bonus and its share in total remuneration. Margin of covering variable costs is a very important indicator and is calculated also when managers of a responsibility center are not fully responsible for earning revenue. In coal mining companies decisions about prices and sales policy are made by company’s management. This includes special clauses for sales to customers from energetic sector, steel industry, autho- rized coal dealers and exporters. The competences relating to enriching coal in internal and external processing entities and keeping inventories of coal are delegated to mines’ CEOs.

They do not control then the most important parameters that shape the revenue. However, when sales proceeds of a mine can be estimated, then bonus fund setting may use the gross margin II. Dividing this bonus fund into bonuses for managers, administrative personnel and employees of particular divisions and departments, that are separate cost centers, should be done on the basis of indicators that are controlled by managers of particular centers.

Adjusting the set of parameters to be basis for granting bonuses must consider the competences of particular managers and must not cover features that are beyond their full or partial responsibility.

In the group of parameters deciding of bonuses for management of a mine one should include the following:

— degree of realization of the gross margin II,

— ratio of the level of mining costs (costs of mining coal/revenue),

— meeting the planned production of salable coal (in 000 kg),

— daily productivity (in 000 kg/day) (comparison to the previous period),

— number of accidents at the workplace.

In order to recognize the degree of completion of the set assignments, the first three actual indicators can be compared with those defined in the plans. The latter three should be benchmarked to the results of the previous periods. Out of the proposed indicators one can use four, but aside of evaluation of economic results it is necessary to include the number of accidents. In the real life of a mining industry, that exhibits high variability of work conditions and many unpredictable events, one should focus on work safety and con- tinuously strive for improvement in this regard. It turns out very often, that mines that try t cut production costs look for savings in the area of safety and hygiene of work conditions. The

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basis for comparisons for the number of accidents should be the previous periods charac- teristics of this variable. The proposed set of indicators for evaluating a mine performance should be adjusted to the needs. In practice, some of the proposed indicators can be omitted and substitute them with others in order to meet information demand of coal mining companies’ management. Both, the systems of evaluation and bonus systems must be designed individually for each of the coal mining companies and their coal mines.

For the parameters one have to set appropriate weights. This is necessary in all cases, when evaluation is based on many criteria. For example:

— meeting the budgeted costs – 40%,

— degree of realization of gross margin II – 20%,

— quantity of coal extracted – 20%,

— number of accidents – 20%.

The presented example should not be perceived as a role solution to be directly im- plemented in the real life. Parameters used in granting bonuses must be defined in accordance with competences of the management, discussed with managers and agreed upon for realization. This means that they have to be designed individually for each of the coal mines.

Assuming the higher weight for the realization of the gross margin II is justified by the fact that the management of a mine is responsible for the financial results of the whole entity and influences managers at lower levels to maintain cost discipline. Conducting assignments impacts the level of gross margin II. It is assumed that a bonus for mines’ management and administrative personnel is paid out quarterly. The precondition for the bonus for managers of particular administrative offices should be compliance with budgeted fixed costs for the office and achieving results triggering bonuses at the level of the whole mine.

In direct mining areas bonus systems for workers belonging to miners’ units and their supervisors may be based on:

— indicator of meeting cost budgets in the direct mining area, set as a relation of costs incurred to planned costs [%],

— percentage completion of production plan for a mining area, defined by a ratio of extracted material (in 000 kg) and burning capacity per unit of production [kg/000 kg].

The way of granting a bonus for realization of defined assignments should be similar as in case of an extraction unit. In addition, it is advised to pay bonuses for miners on the monthly basis.

In a mechanical processing unit it is advised for a bonus system to consider realization of assignments defined as:

— degree of realization of gross margin II – general assignment,

— meeting budgets for mechanical processing (ratio of costs incurred to the quantity of enriched coal),

— degree of realization of tangible assignments.

The last two assignments are partial assignments, which should shape about 60% of the bonus paid out.

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There is a need for a role solution in bonus systems for workers at supporting divisions.

Similarly, as in case of miners, settlement of bonuses for realization of assignments should be on the monthly basis. In particular this covers the following divisions:

— centers of pre-production activities,

— centers involved in supporting and liquidating areas of direct mining activities,

— ventilation supporting centers,

— electricity supporting centers,

— mechanical support centers,

— shaft maintenance centers,

— transportation and elevators maintenance centers.

For all mentioned centers a crucial assignment is meeting cost budgets for the division.

System of evaluation of these budgets must be correlated with the system of budgeting. In case of using divisional cost accounting in a mine, budgets are compiled for all centers separately on the monthly basis and this is a rationale for monthly settlement of bonuses.

Up to date divisional cost accounting is used for coal mines and costs of particular divisions are recorded according to process costing, showing depreciation, direct materials, direct labor, and overhead costs. The divisional cost accounting allows for retrieving information about the quantity of resources consumed. This in turn allows for planning of their consumption by each unit and setting responsibilities for them. This cost accounting approach doe not allow however for separating costs into categories dependant on quantity of extracted coal and fixed costs, incurred due to necessity to maintain a certain division/unit in readiness.

So far, the evaluation of realization of assignments in recognized centers of supporting processes (cost centers) is based on a simple analysis of deviations from plan, divided into categories of process costing system. It is difficult in such a framework to recognize in what extent the deviation observed is justified alteration in the scope of realized assignments and in what extent this is a result of erroneous decisions of a manager of the division. Process costing makes it difficult to recognize factors shaping costs dependent on work effort and decision of the head of a division and independent – resulting from the scope of realized assignments (assumed economic activity). Therefore the extent of budget realization for a given division as a measure used for bonus system must be supplemented by some additional measures of realization of tangible assignments or indicators based on ratio of costs incurred to set assignments. Kinds and selection of indicators must be correlated with goals and indicators used in the Balanced Score Card. Selected indicators must be set on the basis of budgeted numbers and actual results. Only the comparison of these two categories allows for recognizing of the extent in which goals are achieved.

The proposed construction of a bonus system should motivate to realization both current production plans, as well as directing attention of employees on improving financial standing of the whole company. It facilitates the interest in the company’s situation, and familiarizing with its aims, and will to cooperate of employees’ teams in order to conduct the planned assignments. An important assumption at the roots of this motivating system proposition via

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bonuses is ability to avoid granting benefits when bonus-earning assignments were not conducted in the proper time, defined for bonus purposes (a month, a quarter, a year).

A bonus in the proposed form is not only a motivating factor (as a consequence of its implementation), but also in some extent it can be an integrating factor and cause an effect of permanent interest in continuous development of a company and improving market position.

Conclusions

In order to secure proper behavior of all employees and integrate them around crucial assignments for an enterprise one has to design a consistent bonus system, in which basis for bonuses is clearly defined, criteria and methods of evaluation of the extent of assignments (goals) realization, rules for linking outcomes of evaluation with bonuses and requirements of receiving bonuses, i.e. requirements that must be met by an employee in order he (or she) gets a bonus. Realization of assignments at the level of a company should be the basis for granting bonuses for management and administrative personnel, which have a special impact on shaping corporate results. For organizational units for which work effort results can be measured one proposes distinctive bases for bonuses.

For employees of responsibility centers, directly involved in technological processes, such as: production, improving quality of the product, sales, one can introduce monthly and quarterly bonuses. The former category is dependant on realization of tangible assignments set for particular responsibility centers. This bonus is related with the current production activity of the company. The employees involved in its division are both those employed as line workers and supervisors with some totally independent criteria of granting bonuses for each of the groups.

Quarterly bonuses should depend on realization of assignments related to improving quality, increase of productivity and financial result of a coal mining company and mines themselves. Bonus-earning assignments in a form of increase of profits, minimizing loses, decreasing production costs or achieving a certain revenue for mines can be the same as assignments set at the level of a company. Particular internal organizational units always realize assignments included in a strategy of a business entity in a certain proportion.

The proposal of a design of a bonus system should motivate to realization of current production plans as well as to direct employees interest to improving financial standing of the entity. It will facilitate interest in the economic situation of the company, identification with its goals and will to cooperate of personnel teams in order to conduct set assignments. An important assumption for this motivating proposal via bonuses is the possibility of not granting it in cases when set bonus-earning assignments were not achieved in a given period, defined for bonus purposes (a month, a quarter, a year).

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SYSTEM PREMIOWY W GÓRNICTWIE – STAN OBECNY I KIERUNKI ZMIAN

S ³ o w a k l u c z o w e Spó³ki górnicze, system premiowy, system motywacyjny

S t r e s z c z e n i e

W artykule zawarta zosta³a analiza dotychczasowych systemów premiowych w górnictwie i propozycja ich zmian. Premie stanowi¹ od 7 do 10% wynagrodzenia ogó³em pracowników zatrudnionych w górnictwie, a powinny mieæ co najmniej 15–20% udzia³u w strukturze tych wynagrodzeñ. Nale¿y zmieniæ podstawy premiowania i przyj¹æ mierniki oceny wykorzystywane w controllingowych systemach zarz¹dzania. Najwa¿niejszym parametrem do premiowania powinno byæ dotrzymanie bud¿etu kosztów. Dodatkowo powinno siê uwzglêdniæ zadania dotycz¹ce poprawy jakoœci, wzrostu produktywnoœci zaanga¿owanego w procesach wydobywczych maj¹tku oraz wyników finansowych. Proponuje siê zachowanie spójnoœci systemów oceny i premiowania na wszystkich szczeblach zarz¹dzania w górnictwie – spó³kach górniczych, kopalniach i ich oddzia³ach.

BONUS SYSTEMS IN MINING INDUSTRY. CURRENT SITUATION AND FUTURE DEVELOPMENTS

K e y w o r d s Bonus systems, mining industry, motivation system

A b s t r a c t

The paper covers an analysis of bonus systems in mining industry and offer a proposal of changes in this matter. Bonuses represent from 7 to 10% of the total remuneration of all mining industry workers. In Authors’

opinion these bonuses should represent at least 15–20% share in the structure of the remuneration. There is a need for adjusting basis for granting bonuses and implement indicators used in controlling. The most crucial parameter for granting bonuses should be meeting budgeted costs. In addition this basis should control for assignments aimed at improving quality, increase in productivity of assets involved directly in mining and financial results. Authors advocate consistency to be maintained in evaluation and bonus systems at all management levels in mining industry.

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