John Deere employees’ new contract changes production incentives. Here’s how it works

The main change in the contract with Deere & Co. that UAW members approved Wednesday was to elements of the company's production incentive program.

The company divides many of its production workers into teams and offers extra payment if a group exceeds stated goals, such as for the number of tractors it makes in a week. If a team exceeds the goal by 15%, the members get a 15% pay bump on their weekly check.

If the team exceeds the goal by more than 15%, the company still only pays them an extra 15% for that week. In those cases, the company sets aside more money for the workers but it only pays it out to them every 13 weeks.

More:John Deere employees approve third contract proposal, ending their five-week long strike

For example, if a team member normally makes $1,000 a week and the group exceeded its production goal by 20% in a given week, the company will pay the worker $1,150 — 15% more than the employee's base earnings.

At the same time, the company takes another $50 for each worker — the extra 5% they didn't receive for that week — and puts it into the fund. After 13 weeks, or once a quarter, the company divides whatever amount is in that fund among all the team members.

New incentive system will pay off more often

Under the new contract, the company said it will increase the amount it pays each week to 20% above the production target. That means a worker earning $1,000 a week will get $1,200 on a check instead of $1,150. Broadly speaking, the change speeds up when workers receive the extra money.

Managers also promised not to hike production targets as aggressively as they have in the past.

Previously, if a team averaged 20% above its target for six months, the company would change the goal. Either managers told workers to produce more goods every week, or they reduced the size of the team yet expected them to produce at the same rate.

The increased targets are supposed to make the company more efficient. But raising the bar also means weekly pay drops even if workers perform as well as they did before.

Abe Elam, a worker at Deere's Ottumwa Works and the sergeant-at-arms at United Auto Workers Local 74, said workers have long complained about how the company manages the program. Even when teams struggle to keep up with targets, he said, managers move some of the workers to other tasks, leaving the rest of team on the hook to meet the goal with fewer members.

More:Timeline shows key dates in the John Deere strike

Elam said those employees were set up to fail. And yet, he said, managers didn't listen. To have their concerns heard, the workers had to file grievances with the union, setting off a legal process with a mediator that could take years.

"You basically didn't know what you would get paid from week to week and year to year," Elam said. "... A lot of times, (managers) just say, 'It's the worker being lazy, not wanting to produce.' Well, that's not the case. All 7,000 (incentive-based) employees are lazy, right? That's ludicrous.

"It's because of a lack of parts. it's because of a lack of manpower. It's because of the standards that they gave us."

Under the new agreement, the company said it will task specific managers with investigating why some teams aren't hitting their targets. Union leaders hope managers will make changes to support those groups.

Diana Swartz, an assembler on the sprayer line at the John Deere Des Moines Works in Ankeny, said she voted for the contract because of its 10% wage raise, but that she hopes the changes to the incentive program work.

Previously:Head of largest U.S. labor group tells striking John Deere workers: 'The nation is watching'

She said members of her team have become frustrated this year because Deere has struggled to get parts from suppliers. Even though workers continue to do their jobs, she said, her team's goal of making 22 sprayers a day has been impossible since this summer. On their best days, they made 16.

"Our (incentive program) was so bad," she said. "It just gets strung along. Nothing's done about it."

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.