Profit sharing plan

Basic Overview


Under this plan, payment payment is based on the evaluation of the profit of this organizational performance indicator, profit The sharing plan is a reward for one-time payment, which will not enter the basic salary of the employee, so it will not increase the organization's fixed salary cost. In practical use, profit sharing plans to be more effective in mature companies.


The basic idea of ​​profit sharing programs is to assign company profits to employees in accordance with certain ratios.

Profit sharing plan

Specific practice has a variety of:

1, some companies share the annual total profit in accordance with the results of employee performance evaluation.

2, some companies have issued a fixed amount of fixed amounts to employees every other period of time.

3, some companies can take part of the profitable employee account and employees in the predetermined proportion of the enterprise, and can enjoy the lower tax rate.


Profit sharing plan variety:

1, cash plan

cash plan is the most popular profit sharing The plan, that is, a certain ratio (typically 15% -20%) profits is used as a profit shared.

2, Extension Profit Sharing Plan

In the case of supervising and commissioning management, enterprises deposit a part of the profits into the employee account at a certain period of time. Such plans allow employees to enjoy tax benefits, because personal income income tax payment to postpon employee retirement, so he or she only pays tax at a lower tax rate.

Advantages and Disadvantages

Advantages of profit sharing plan

The advantage of profit sharing plans is to reflect the interests of employees in the same plan, so that all employees pay attention to the company The profit, the size of the company's profits directly affects employee's benefits.

Summary of profit sharing plans

The shortcoming of profit sharing plans is that the program is usually hooked with employees, the profit sharing plan does not consider employee personal performance, it only pays attention to companies Business objectives.

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