SEED Plan for Manufacturing

This article explores the nuances of the Manufacturing industries along with prevalent trends in employment and salary patterns.

Since the dawn of civilization, human society has required materials ranging from a ladle to a car. The Manufacturing industries cater to this particular human need. Considering the extensive list and the scale of production, the Manufacturing industry has evolved into a diverse sector employing huge manpower in companies of varying sizes. Some are owned by the government while most of them are private operations.

This article explores the nuances of the Manufacturing industries along with prevalent trends in employment and salary patterns. Being such a labor-intensive sector, offering employees equity is increasingly gaining popularity. In this article, we will also take a closer look at ESOP for employees and Eqvista’s unique SEED plan for the same.

Manufacturing Companies

The Manufacturing sector is a fast-growing one. It has a direct impact on the health of a nation’s economy. Since 2003, this sector has recorded a growth of 9 – 10%. In the next decade, this growth rate is expected to increase to 12%. But what do these companies do and why are they important? Let’s try to understand their role in society.

What Manufacturing companies do? Why are they important?

Nature provides for all human needs. But these resources in their natural form cannot be used in a modern household. For example, cotton has to be processed into cloth, rawhide into leather, etc. This is where the Manufacturing industry steps in. Companies in the Manufacturing sector undertake the responsibility of converting raw materials into finished goods suitable for human consumption. Producing these on a large scale is the primary role of this sector. This industry is essential for the economy because:

  • A high rate of product manufacturing indicates high demand. This reflects consumer behavior and increasing purchasing power which is essential for a thriving economy
  • This industry not only caters to a nation’s product demands, but the export needs as well. The export trade in turn attracts foreign exchange.
  • This industry thrives on skilled and unskilled labor. It is thus an important contributor to employment opportunities.
  • With increasing automation processes, the manufacturing industry helps maximize production in traditional sectors such as Agriculture.

Industry Forecast

The forecast for the manufacturing industry remains unstable, with the effects of COVID-19 still lingering on the industry, having full production capacity still yet to be brought online. A report from Deloitte expects a forecast of 3.5% growth in 2021, up from -6.3% forecast in 2020. However as the economy slowly recovers, the manufacturing industry is expected to grow with higher demand for products and goods.

Types of Manufacturing

Setting up a manufacturing plant is quite a process. Since raw materials have to be converted into finished goods, apart from proximity to natural resources, a well-oiled supply chain has to be set up. Apart from access to raw materials, some of the other factors that contribute to finalizing a manufacturing plant are accessibility of cheap labor, adequate power supply, infrastructure, proximity to market, etc.

Based on capital investments, this sector comprises either small scale industries that have invested capital, or large scale industries with investments. Otherwise broadly based on ownership, the manufacturing industry is classified into four sectors:

  • Government owner or public sector
  • Individual or group of individuals owned private sector
  • Government and private jointly owned sector, and
  • Cooperatives – mostly rural economies

Manufacturing Industry Statistics

By number of firms:

# of employeesAverage20172016201520142013

A five-year trend between 2013 and 2017 shows that on average almost 60% of the firms in the Manufacturing industry operate with employees in the range of 0 – 9. This is closely followed by firms having 10 – 19 employees at 15.13% and 20 – 49 employees at 13.35%. According to this data, firms employing 500 or more employees are the least in number forming only 1.52% of the industry.

On the whole, the Manufacturing sector is dominated by companies employing less than 10 personnel.

By number of employees:

# of employeesAverage20172016201520142013

On the contrary, when employee trends are observed during the same five-year period, on average 55.77% of the entire workforce of the Manufacturing industry seem to opt to work for companies employing more than 500 people. The second best preferences are the firms employing 200 – 499 personnel. This has been a consistent trend between 2013 and 2017.

It is evident from this data that more than half of the workforce in the Manufacturing industry preferred to work for large firms employing 200 people and more. As these firms have more employees under one company, it would be beneficial for them to employ ESOPs in their Manufacturing company to help motivate staff.

Top Jobs/ Average wages per job:

Sample SizeEmployment %Average SalaryAverage SalaryAverage Salary
All Occupations12,707,850100.00%$54,260$53,020$51,740
Production Occupations6,466,39050.88%$40,580$39,690$38,680
Other Production Occupations1,886,07014.84%$39,750$38,270$37,110
Metal Workers and Plastic Workers1,513,14011.91%$41,500$41,010$40,250
Assemblers and Fabricators1,427,67011.23%$37,610$36,990$35,900
Transportation and Material Moving Occupations1,095,6208.62%$36,580$35,570$34,530
Office and Administrative Support Occupations1,031,9508.12%$43,490$41,910$40,830
Miscellaneous Assemblers and Fabricators1,006,9107.92%$36,320$35,890$34,730
Material Moving Workers855,7206.73%$34,080$32,760$31,720
Architecture and Engineering Occupations829,3206.53%$88,320$86,710$85,630
Management Occupations718,5605.65%$135,430$134,060$131,210
Laborers and Material Movers667,3605.25%$32,810$31,220$30,110
Installation, Maintenance, and Repair Occupations648,6705.10%$54,040$52,670$51,870
Business and Financial Operations Occupations526,7204.14%$76,800$75,150$74,370
Other Installation, Maintenance, and Repair Occupations514,4504.05%$50,960$49,700$48,850
Miscellaneous Production Workers465,2103.66%$35,930$35,330$33,940
First-Line Supervisors of Production and Operating Workers462,9503.64%$65,050$64,230
Food Processing Workers459,1903.61%$31,110$30,130$29,030
Sales and Related Occupations426,6503.36%$68,130$66,670$64,730
Business Operations Specialists413,3603.25%$75,670$73,890$73,300
Inspectors, Testers, Sorters, Samplers, and Weighers365,2902.87%$43,140$42,210$41,240
Laborers and Freight, Stock, and Material Movers, Hand359,0402.83%$33,740$32,600$31,530
Material Recording, Scheduling, Dispatching, and Distributing Workers352,7602.78%$42,280$40,090$39,230
Computer and Mathematical Occupations307,1402.42%$102,710$100,880$98,310
Welding, Soldering, and Brazing Workers304,9702.40%$42,570$41,640$40,650
Computer Occupations297,1702.34%$102,890$100,980$98,450
Machine Tool Cutting Setters, Operators, and Tenders, Metal and Plastic296,0302.33%$38,710$37,770$36,750
Operations Specialties Managers294,1002.31%$123,510$121,470$118,010
Sales Representatives, Wholesale and Manufacturing293,9302.31%$76,500$74,730$72,430
Packaging and Filling Machine Operators and Tenders287,8602.27%$34,690$34,010$33,400
Industrial Machinery Installation, Repair, and Maintenance Workers274,8502.16%$54,240$52,950$52,030
Welders, Cutters, Solderers, and Brazers274,7902.16%$42,860$41,970$40,890
Electrical, Electronics, and Electromechanical Assemblers259,1202.04%$36,940$35,850$35,020
Textile, Apparel, and Furnishings Workers244,1501.92%$30,720$29,700$28,850

The classifications for these occupations often overlap one another, so total employment size % may result in a larger number than 100% for all jobs.

To understand the employment and salary trends in the Manufacturing sector, a sample size of 12,707,850 spanning all profiles was observed over three years between 2017 and 2019. In terms of average salaries, this sector displayed a positive trend beginning at $51,740 in 2017 and increasing to $54,260 by 2019 – a clear jump of almost 5%. The top five job profiles in this sector are:

  • Production Occupations
  • Other Production Occupations
  • Metal Workers and Plastic Workers
  • Assemblers and Fabricators
  • Transportation and Material Moving Occupations

The job profile of Production Occupations employed almost 50.88% of the workforce. The average salaries too showed an upward trend between 2017 and 2019. In 2017 it was $38,680 and by 2019 this increased by 4.91% and became $40,580.

This was closely followed by other Production Occupations profiles engaging 14.84% employment in 2019. This profile too displayed an annual increase in average salaries over the three years between 2017 – 19. What was $37,110 in 2017 reached $39,750 by 2019, posting an overall growth of 7%.

The third most attractive job profile in the Manufacturing sector was Metalworkers and Plastic Workers. This engaged almost 11.91%of the workforce in 2019. The average salary was $40,250 in 2017 which showed an annual growth of almost 2% every year between 2017 and 2019 and reached $41,500.

The profile of Assemblers and Fabricators too posted an 11.23% employee engagement in 2019. There was an almost 5% increase in average salaries over the three years. In 2017 it was $35,900 and by 2019 the average salary of this profile had become $37,610.

Transportation and Material moving occupations were the fifth most engaging job profile in the Manufacturing industry. In 2019, 8.62% of the workforce was employed in this profile. The average salary was $34,530 in 2017 and reached $36,580 by 2019, a jump of almost 6%.

Overall, all job profiles in the Manufacturing industry posted an upward trend in the average salaries indicating a positive employment trend and overall performance of the sector as a whole.

ESOP in Manufacturing

The Manufacturing industry is a competitive space for employees. Since the number of jobs is many and comparatively the availability of skilled workers is less, the best ones look for employers who offer competitive remuneration packages. Compared to all industries put together that showed an employee turnover of 12%, the Manufacturing industry rate of turnover was 22%. The survey indicates that the primary reason behind this high employee turnover was the mismatch between employers and employee expectations.

Why is offering ESOP a better option for Manufacturing companies?

Recruitment trends in the Manufacturing industry indicate that attractive remuneration packages ensuring long-term benefits have a direct impact on employee retention. The Employee Stock Option Plan (ESOP) offered as part of retirement benefits is a reliable way to do this. Offering ESOP is also an attractive recruitment tool.

Once an employee is granted stock options in a company, they become part owners. As a result, they are invited to look into the financial statistics of the business and participate in the revenue-maximizing process. This creates a shift in attitude and employees feel connected to company growth and profits. They are no longer external contributors but owners who drive company expansion.

ESOP is also a good strategy for company owners (especially family-owned enterprises) to plan company succession. Instead of facing liquidity issues during exit, it is better to invest in capable employees with a long term vision of ultimately handing over the company reins. However, for the ESOP plan to work, the company must have a strong second line of leadership and good revenue flow that ensures stock price acceleration.

SEED by Eqvista – Plan for Manufacturing

SEED or Simple Employee Equity Development is a unique product of Eqvista. It is a comprehensive equity rewards plan for labor-intensive industries like Manufacturing. SEED proposes equity provision for companies of all sizes ranging from a startup with a handful of employees to established companies. Equity rewards are suggested in the form of time based and milestone based. The percentages vary based on the company size and seniority of the employee.

Considering the trend of ESOP gaining popularity in the Manufacturing sector, SEED by Eqvista is designed in a way that will accommodate the diverse equity distribution needs of this sector. SEED suggests vesting schedules of 3 – 4 years with a mandatory cliff period. Milestone vesting is an important inclusion as well. Also, the suggested employee pool is around 10%. This can be as high as 20% depending on the company size. With years of experience in handling equity needs for various industries, SEED by Eqvista offers a comprehensive equity rewards plan that can be customized to specific industry needs.

Ready to use Eqvista’s SEED plans for your Manufacturing Company?

Cap table management is the cornerstone of equity distribution in a company. Be it a startup or an established corporate, understanding the importance of proper share management is key to smooth stakeholder relationships. Stakeholders in a company are not only the employees but investors as well. Thus mismanagement of shares directly impacts company reputation. Eqvista software is one of the best-automated solutions in the market for equity management. Our state-of-the-art technology provided end-to-end share management services for companies of all sizes.

If you’re interested to learn more about our cap table software, 409a valuation services, financial modeling, and others, reach us today.

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