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 ?
The resulting report, Benerofe explained, provides information in the form of analyses of current contracts, explanation of the major features of standard agreements as well as variations among companies' calculation procedures, comparison of profit sharing amounts for a theoretical agency, ratios of actual total profit sharing payouts to total writings, and a suggested procedure for analyzing an agency's actual contracts.
Different profit sharing plans were developed as per specific requirements of a firm.
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.
Consider the issues Kruse encounters when trying to determine whether profit sharing causes increased organization productivity.
Under the age-weighted profit sharing plan, the allocation could be $5,673 for the older and $327 for the younger--seventeen times as much if the plan is not subject to the "top-heavy" rules, and six times as much if it is ($5,100 and $900).
In "Profit Sharing and Productivity," Weitzman and Kruse discuss the use of profit sharing as a means to improve productivity.
Procter & Gamble, for instance, introduced profit sharing a century ago.
CHICAGO -- The Profit Sharing / 401k Council of America (PSCA) commends President Obama, Treasury Secretary Tim Geithner, and J.
M2 EQUITYBITES-February 6, 2015-Southwest Airlines makes record profit sharing payment