profit sharing

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profit sharing,

arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of equipment, and the like. Profit sharing does not imply participation by the workers in management. The employer determines the rate at which profits are shared; since the rate is fixed beforehand, profit sharing differs from the bonusbonus,
extra amount in money, bonds, or goods over what is normally due. The term is applied especially to payments to employees either for production in excess of the normal (wage incentive) or as a share of surplus profits.
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 system. Profit sharing plans have been in operation in France since 1842 but have not been widely adopted in the United States. The plan has been most successful in businesses where employees work without direct supervision or where it is limited to supervisory employees or lesser executives, e.g., branch managers and department managers in department stores.

profit sharing

[′präf·ət ‚sher·iŋ]
(industrial engineering)
Sharing of company profits with the employees.
References in periodicals archive ?
Profit-sharing plans may permit employers to make relatively large, tax-deductible contributions to employees' retirement funds.
Latent Market--There are many business owners with 401(k) profit-sharing plans in place for whom the Qualified Combo Plan will be an attractive strategy.
There are several factors a company must consider with a profit-sharing plan.
employees via a company-sponsored profit-sharing plan.
The returns achieved by profit-sharing plan portfolios will generally be unrelated or weakly related to company-specific performance as well.
To be considered a profit-sharing plan in the survey, a plan must have its level of employer contributions determined primarily by the level of company profits.
For 2007, there were 5,439 eligible employees in Baldor's profit-sharing plan, and the average contribution was 3.
One can reasonably assume that a business that operates a profit-sharing plan would make annual contributions.
Corporation 2 established a profit-sharing plan with a 401(k) feature and received a favorable determination letter.
In a profit-sharing plan, you can invest up to 15% of your income, or a maximum of $22,500
This accounting also applies in situations where companies use ESOPs to settle or fund other employee benefits, such as a 401(k) match (a KSOP) or contributions to a profit-sharing plan.