- Profit sharing
Profit sharing, when used as a special term, refers to various
incentiveplans introduced by businesses that provide direct or indirect payments to employees that depend on company's profitability in addition to employees' regular salaryand bonuses. In publicly traded companiesthese plans typically amount to allocation of sharesto employees.
The profit sharing plans are based on predetermined
economicsharing rules that define the split of gains between the company as a principal and the employee as an agent.Moffatt, Mike. (2008) About.com" [http://economics.about.com/od/economicsglossary/g/sharingrule.htm Sharing Rule] " Economics Glossary; Terms Beginning with S. Accessed June 19, 2008.] For example, suppose the profits are x, which might be a random variable. Before knowing the profits, the principal and agent might agree on a sharing rule s(x). Here, the agent will receive s(x) and the principal will receive the residual gain x-s(x).
Management's share of profits
The share of profits paid to the management, or to the
Board of Directorsis sometimes called the tantième [ [http://www.ubs.com/1/e/about/bterms/content_m.html] UBS Dictionary of Banking: Letter M, "management's share of profits"] [ [http://www.eurofound.eu.int/emire/GERMANY/SHAREOFPROFITS-DE.html 'Share of profits'] ] . This French languageterm is generally applied in describing the business and finance practices of certain European countries -, including Germany, France, Belgium, and Sweden. It is usually paid in addition to the manager's (or director's) fixed salary and bonuses (bonuses usually depend on profits as well, and often bonuses and tantieme are treated as the same thing); laws vary from country to country.
United States, a profit sharing plan can be set up where all or some of the employee's profit sharing amount can be contributed to a retirement plan. These are often used in conjunction with 401(k) plans.
Gainsharing is a program that returns cost savings to the employees, usually as a lump-sum bonus. It is a productivity measure, as opposed to profit-sharing which is a profitability measure. There are three major types of gainsharing:
*Scanlon plan: This program dates back to the 1930s and relies on committees to create cost-sharing ideas
*Rucker plan: This plan also uses committees, but although the committee structure is simpler the cost-saving calculations are more complex.
*Improshare: Improshare stands for "Improved productivity through sharing" and is a more recent plan. With this plan, a standard is developed that identifies the expected number of hours to produce something, and any savings between this standard and actual production are shared between the company and the workers. [Citation
first =Luis R.
first2 =David B.
title =Managing Human Resources
Upper Saddle River, New Jersey
publisher =Pearson Prentice Hall
isbn =0-13-187067-x ]
Retirement plans in the United States
macroeconomics of profitsharing -www.profitsharinguprising.com
Wikimedia Foundation. 2010.
Look at other dictionaries:
profit sharing — ˈprofit ˌsharing also profit sharing noun [uncountable] 1. HUMAN RESOURCES when a company gives part of its profits to its employees: • He has long believed in employee profit sharing or employee ownership. • The 2005 … Financial and business terms
profit-sharing — UK US (also profit sharing) noun [U] ► HR a system by which employees receive a part of the profits of a business: »The company s costs increased due to higher employee profit sharing. »a profit sharing agreement/plan/scheme … Financial and business terms
profit sharing — n. the practice of dividing a share of the profits of a business among employees, in addition to paying their regular wages and salaries profit sharing adj … English World dictionary
profit sharing — profit shar·ing n: a plan under which employees receive a part of the profits of an enterprise Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 … Law dictionary
profit sharing — profit .sharing n [U] a system by which all the people who work for a company receive part of its profits … Dictionary of contemporary English
profit sharing — profit ,sharing noun uncount BUSINESS a system by which all the people employed by a company get a share in the profits … Usage of the words and phrases in modern English
profit-sharing — ► NOUN ▪ a system in which the people who work for a company receive a direct share of its profits … English terms dictionary
profit sharing — profitsharing, adj. the sharing of profits, as between employer and employee, esp. in such a way that the employee receives, in addition to wages, a share in the profits of the business. [1880 85] * * * System by which employees are paid a share… … Universalium
profit-sharing — profˈit sharing noun A voluntary agreement under which an employee receives a share, fixed beforehand, of the profits of a business • • • Main Entry: ↑profit * * * ˈprofit sharing [profit sharing] noun uncountabl … Useful english dictionary
profit sharing — noun a system in which employees receive a share of the net profits of the business (Freq. 1) • Hypernyms: ↑share, ↑portion, ↑part, ↑percentage * * * noun : a system or process under which employees receive a part of the profits of an industrial… … Useful english dictionary