Profit sharing is the most popular method rewarding the employees. Under profit sharing incentive plan, the employees are paid in addition to the regular wage, a particular share of the net profits of the business as incentive.
Characteristics of Profit Sharing Incentive PlansThe key features of profit sharing incentive plans may be stated as follows:
- It is based on an agreement between the employer and the employees.
- It is a payment made after ascertaining the net profits of the business. It is not therefore, a charge on profits.
- The amount paid to the employees is over and above their normal pay.