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 ?
Along with base pay, Delta's additional compensation elements like the Delta Annual Profit Sharing Plan and "Shared Rewards" program, which pays monthly bonuses for meeting corporate operational goals, are designed to allow employees to earn more when the company performs well.
a fee-only pension and profit sharing plan consulting and administration firm.
Argeros said he has seen his profit sharing double during the past four or five years, something he attributes to his aggressive approach in keeping homeowners policyholders informed about the importance of insurance to value.
Profit sharing is the non-traditional compensation system by which a certain amount of net profit or net gain, in addition to pay/wage, is distributed among the employees in order to increase productivity.
In the present paper, I present a model in the spirit of Holmlund's, but with free entry of firms subject to overhead costs, and show that under Nash wage bargains the effect of profit sharing on both employment and compensation depends on whether the profit share is bargained over or mandated as well as on the profit accounting used to determine share payments.
Most plans cited by Professor BL Metzger's authoritative study, Profit Sharing in 38 Large Companies, (Profit Sharing Research Foundation, Evanston, IL), indicate the most popular choice is at the end of the year.
Unlike profit sharing, which tends to reflect financial measures of productivity, traditional gainsharing plans pay their bonuses out of cost savings.
Many studies have been conducted to observe the effect of profit sharing on productivity.
Reich's failure to address the role of the smallerfirms is particuarly surprising, since these firms are most often the ones on the leading edge of experimentation in employee share-ownership, gain sharing, profit sharing, and employee involvement in general--from failed People Express to stellar Apple to my favorite trio of steelmakers, Nucor, Chaparral, and Worthington Industries.
Today Baldor announced the results of its 2008 employee profit sharing plan contribution.
But Eberhardt said he expects that to shift, at least in terms of profit sharing, in coming months.
Wescast attributed the recognition to its "Scanlon" system of participative management, which centers around monthly gainsharing, annual profit sharing, cross-functional teams, encouraging suggestions, continuous training and communication.