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 ?
Therefore, a profit-sharing plan may help your company to attract, motivate, and retain valued employees.
Cross-testing provisions allow third-party administrators to calculate the contributions being made to a profit-sharing plan on a benefits basis so they can be compared to any benefits being provided under a defined benefit plan.
A profit-sharing plan is a popular compensation system aimed at stimulating the work force to top-flight effort on behalf of the company.
The arguments both for and against ESOPs and profit-sharing plans are based on the assumption that these pay devices actually provide positive feedback from company performance to nonmanagerial pay.
Data from die Bureau of Labor Statistics' (BLS) 1989 Employee Benefits Survey show that profit-sharing plans differ in many key features.
One can reasonably assume that a business that operates a profit-sharing plan would make annual contributions.
The next step in the evolution of profit-sharing plans was to create age-weighted allocation formulas.
This forced the plan sponsor who wanted to cap out at 25% of pay to offer either only a money purchase plan, or pair a 15% profit-sharing plan with a 10% money purchase plan.
An outcome of these favorable provisions is that many employers are choosing to merge their existing profit-sharing plans and MPPPs.
Noteworthy is the fact that incidental death benefit rules that normally limit the amount of pension plan assets that can be used to pay life insurance premiums may not be applicable to profit-sharing plans.
OBRA 1993 made it more difficult for such employees (from exhibit 2) to maximize their contributions not only to 401(k) plans but also to other qualified defined contribution plans such as profit-sharing plans.
First Trust Advisors serves as an investment adviser to separately managed accounts, exchange-traded funds, closed-end funds, variable annuities, profit-sharing plans, and charitable foundations and endowments.