Guys need help: Would you enable Profit Sharing with your employees?

  • 6 October 2023
  • 6 replies
  • 73 views

Badge +1

Profit sharing has a lot of benefits, not only it is meant to be the biggest motivation factor, it really makes employees feel connected to the company. Study shows it also increase profitability of the company - still a big decision. Would you do it?


6 replies

Userlevel 6
Badge +16

Hi @Hayat and welcome to the community 🥳,

I am tagging a couple of very active users, maybe they can share something with you about this topic: @JHBEM, @agathe_martinot, @Edda van der Ende, @Anna Rusinek.

Thank you in advance for sharing your knowledge, everyone 🙌🏼.

Greetings from Munich,

Andrea

Userlevel 4
Badge +13

Hi @Hayat 

Could you maybe elaborate a bit what you mean by your question? It might be something that is not actual in our case which is why I don’t immediately understand, but would be great to hear more.

Edda

Badge +1

Thanks @Andrea 

 

Hey @Edda van der Ende 

We are thinking of sharing our profit or revenue with all our employees. So 5% of revenue goes into a bucket, and then based on performance the employees get a percentage of that. Please check this company who helps with this: https://itsmila.com 

 

I am thinking do people like the idea of profit or revenue sharing - as we go more towards a shared capitalist society.

Userlevel 2
Badge +4

We are not profitable so far, but it is a French obligation to have profit sharing when you have more than 50 employees and are profitable :) 

Userlevel 6
Badge +18

Short Answer - Yes

 

in the UK there is a growing trend for SMEs to be Employee-owned.

That is to say that they have a more active involvement in major decisions and rewards.

Something to consider as alternatives are Shares/Equity - but avoid Options.
Options don’t provide immediate access and require someone to invest cash to ‘buy in’ this is exclusionary to potentially valued team members.

A lot of organisations will restrict Shares to seniors - I’d avoid this

but you could limit that shares are earnt after vesting periods - say 1, 2, 3, 5 years and so on.
As you continue to work with the company that tenure is recognised.

So it doesn’t have to be profit-sharing / bonuses

but could be equity instead - that might have no payout for several years.

Also having the option to buy share/equity is good.

I think the profit sharing model makes sense from a company point of view. If the business is going well, you can distribute the wealth with your employees, and if business is tough, you might be able to avoid layoffs as your salary cost decreases (assuming the bonus won’t be paid out).

Employees could say that their impact on the bottom line of the business is limited, and that they would like a more direct compensation boost for their work. You can overcome this in parts by offering faster career progression for your top performers.

The payout of the bonus is likely delayed, as you will have to wait until the year-end results have been determined. If you pay it out throughout the year, you might need to adjust your payments or even ask for them to be paid back.

Employees might see such a bonus payment as a nice to have, but as they only see the payment once per year, and are uncertain about whether the amount will be paid out our not as they don’t necessarily have access to all financials, it can be good fit for companies that need to be attractive even in times of non-profitability.

Let me know if you have specific questions.

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