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Current Profit SharingCompensation Management
Prepared By
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Manu Melwin JoyAssistant Professor
Ilahia School of Management Studies
Kerala, India.Phone – 9744551114
Mail – [email protected]
Current Profit Sharing• One very basic type of
bonus program is current profit sharing. A company sets aside a predetermined amount, usually between 2.5 and 7.5 percent of payroll but sometimes as high as 15 percent, as a bonus on top of base salary.
Current Profit Sharing• Such bonuses depend on
company profits, either the entire company's profitability or from a given line of business. Sometimes the bonuses are given across the board, and sometimes they are given in larger percentages of compensation the more someone makes.
Current Profit Sharing• Profit sharing refers to various
incentive plans introduced by businesses that provide direct or indirect payments to employees that depend on company's profitability in addition to employees' regular salary and bonuses. In publicly traded companies these plans typically amount to allocation of shares to employees.
Current Profit Sharing
• The profit sharing plans are
based on predetermined
economic sharing rules that
define the split of gains
between the company as a
principal and the employee
as an agent
Current Profit Sharing• 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).
Current Profit Sharing
• The purpose of profit sharing
bonuses is to encourage
employees to understand
how their work affects the
company's performance and
to improve the company's
profitability.
Current Profit Sharing
• Learn how your company
makes money and how your
position can help it make
more. The annual report and
other statements will give
you an idea of how the
company is performing.
Current Profit Sharing
• It will also make you look
good to your manager if
you show an interest in
the company's
performance.
