How does communism encourage individualism?

When the idea of communism was created people's lives were reduced to toiling in coal mines or cotton mills, doing the same repetitive task over and over, never seeing any gain for the vast amount of effort they put forth, but all of the wealth they were creating going into the pockets of a newly arising class of bourgeoisie. This relationship is obscured today for a variety of reasons but still basically the same. Anyway the idea is that if technology advances enough, and society as a whole accepts the premise that people should be rewarded based on what work they do rather than what they own, then exchanging labor for money will become obsolete. People can work enough to make society function and then devote their lives to whatever other kind of pursuit they want, everybody taking only what they need rather than for instance hording billions of dollars in offshore bank accounts like happens in capitalism.

Whether or not this is even possible is disputed even among leftists but it's not that human personalities can't do it: we shared resources in common and did work according to what the community needed rather than what explicit wages the worker expected to get for thousands of years and on all continents, before kings and money were invented.

What kind of "explanation" are you looking for? Do you want us to show you a communist society in the palm of our hand? First of all, the "individual" as we know it is an illusion created by bourgeois ideology and society. An individual is part of a collective. Without a collective, an individual is just a mere animal with no way of surviving. In a communist world, the individual would be free to labor as he/she pleases without the fetters of the market, division of labor, alienation, or exploitation of capitalism. How exactly this will look cannot be explained in full, because we do not live in a communist society. I know Paul Cockshott has proposed models that involve calculating labor time via some kind of supercomputer system. These are theories that ultimately need to be tested in practice. In order to do that, we are going to have to overthrow the bourgeoisie. Without that, all this talk about communism is just a dream. Proposing a utopian blueprint for the future is not the purpose of Marxism.

The person who told you that is a bad coummunist the idea is to give rights to the collective and not the individual.

It doesn't.

Individuality is crushed and considered a threat to the power of the state.

it doesn't. just the opposite. it demands rigid conformity under threat. even false accusations against people for not conforming or endorsing the party line can result in severe punishments, including execution.

Communism basically means you will earn however much as the next guy, no matter how much you work. This eliminates your sense of your individualism and your motivation for working.

They wouldn't be limited to their ability of what they can afford. Here you are as free as your ability to pay. For example, without money you don't go to school beyond high school.