Plan to implement profits sharing

Discussion in 'Growing and Managing a Business' started by Alexishost, Feb 13, 2010.

  1. Alexishost

    Alexishost
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    New Policy
    Alexishost want to start implementing new policy. Profit sharing system.
    20 percent for company 40 percent go for employee 40 percent go for owner

    Your oppinion
    I would like to know your oppinion about this to make it effective for the highest good of all.

    Thanks!

    Have great day and Prosper!
     
  2. Fergal

    Fergal
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    Profit sharing is a good way to motivate employees. The better the company does, the more they get paid, hence it aligns their interest with the good of the company. Giving 40% of the profit to the employees, sounds quite high on the face of it, especially if the employees are well paid for the work they do.

    How did you come up with the 40% figure?
     
  3. DEADMAN

    DEADMAN
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    Not only should the profit sharing help owner but also to the employee. Have you implemented the profit sharing? How has this been effecting whole system?

    I believe you need to implement your profit sharing for trial. I think it's not bad with the ratio, let's see and report how it works effectively or not.
     
  4. seanstevens

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    You say 20% for the company, 40% employee & 40% owner. What type of company is it? Depending on the type of company (legal status) there will be a lot of work that needs to go into the legal side of things to make everything work correctly and legally.

    My own personal feelings on profit sharing is that they are good when things are going really well, but the downside is that if the company suffers by just 1% then every employee in the scheme immediately knows about it and morale can suffer which then damages the company in the longer term.
     
  5. ardee

    ardee
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    at least they are not thinking much about themselves but for their employees, it will be a great motivation for their workers.
     
  6. aprillove

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    Ardee is right.. They think of their employees first before them. Thats great .
     
  7. Alexishost

    Alexishost
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    Excited employee.
    Thanks!aprillove, and ardie .you are right, it seems they are a bit exited when they heard about this policy.

    1 year to try it.
    Alexishost will implment it for this year , and let see what happen. Thanks deadman for input.


    Example calculation.

    seanstevens,how to calculate this?
    Profit share $500.000.000
    120 employees

    how much share to employees?
     
  8. Fergal

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    Alexishost will you divide the profit out evenly amongst all employees or will you give certain levels a greater share than others?
     
  9. anatomymodel

    anatomymodel
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    This is a great way to give employees a sense of ownership in the company.
     
  10. chrisdina

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    The positive impact is that it make the employees will work together on the same team. The employees will have the same goals and lack of competition with each other.
    but the weakness is that individual employees cannot see the impact of their own work on the profitability from our company. It gradually becomes more of an entitlement than a motivational factor and employees receive the profit sharing regardless of their own performance.
     
  11. seanstevens

    seanstevens
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    Firstly work out exactly how much you can afford to give away and then decide if it is going to be the same share to every employee or differing levels. Make sure that you get it in writing correctly so that you do not calculate incorrectly from the Gross Profit instead of the Net Profit (more for the employees understanding than your own). Some companies that offer profit share schemes also have a maximum level of compensation paid, so this may be something worth looking into. You will also need to make sure the employees know the timings of everything. When does it start, when does it finish, when will the results be implemented and how transparent will you be of giving them notification of how the company is doing? i.e. will they get updates on a monthly, quarterly or just at the end of the time? This will be important as some will want to knwo what is going on, but if not doing well it could hurt morale and you also have to have in mind that if a staff member leaves to work for a competitor they may know your latest results.

    The calculation itself is simple (Net Profit * percentage agreed / no of employees included in the scheme).

    You will also need to check the tax laws in your country to make sure the employees are taxed (or not) correctly on the profit share (bonus).

    Just a note that if you operate a scheme like this for any length of time there will always be one employee that will accuse the management of using accountancy rules to lower the profits to avoid paying out at a higher level.

    Best of luck with it.
     

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