Profit Incentive Plan
Name
Institution Affiliated
The Profit Sharing Incentive Plan
Incentive plans are the methods that employees of a particular organization are kept in motivation for work done. They are given the incentives upon achievement of the organization’s goals. The profit-sharing incentive plan is based on awarding employees a given percentage of the company’s profits. This incentive works in a way when the company has a contribution of its pre-tax earnings to a pool which will be distributed to employees (Hambly et al., 2019).
The profit-sharing plan has got weaknesses, strengths, opportunities and threats. The advantages include an increase in the employee’s loyalty; acknowledgements on the work importance your employees do by giving out a tangible benefit may increase their commitment to your organization and the job satisfaction levels. Also, the profit-sharing incentive lowers recruitments and salary costs. Addition of this plan to one’s employees helps his/her organization have an improvement in the retention of its employees, saving cash on both recruitment and training. The third pro is that it improves productivity and efficiency; sharing of profits may influence the employee’s efficiency, their motivation and also productivity (Fakhfakh& FitzRoy, 2018).
The main weaknesses of this incentive plan are that if your employees only tend to look at the profits, mostly your business may suffer. This becomes a problem based on them working towards making a more significant profit at the quality of work expense; also, the issues of entitlement and inequality. If there is use of scaled profit sharing, some individuals in the staff may have the feeling of being undervalued and have a perception of system unfairly weighted(Baddon et al,2017) The last weakness is the additional profit sharing costs. A problem comes in if you may want a reinvestment on the profits into your business and the amount you got is less.
Threats on the use of this plan is that there are some arguments that it can be of so much reduction to the employees basic earnings. The opportunities are that making wages flexible, attracting and developing and retention of high quality employees and alignment of the interests on both the workers and organization (Fang, 2016). Arguments from the rest do not bring out the threats but based on the disadvantages, and the incentive plan seems not so capable. SHRM. (2017, June21)Evolving Company Culture[Video]YouTube.https//www.shrm.org/hr-today/news/hr…
References
Hambly, K., Kumar, R. V., Harcourt, M., Lam, H., & Wood, G. (2019). Profit-sharing as an incentive. The International Journal of Human Resource Management, 30(20), 2855-2875.
Fakhfakh, F., & FitzRoy, F. (2018). Is profit-sharing good for the environment? Positive evidence from French firms. Journal of Participation and Employee Ownership.
Baddon, L., Hunter, L., Hyman, J., Leopold, J., & Ramsay, H. (2017). People’s Capitalism?: a critical analysis of profit-sharing and employee share ownership (Vol. 1). Routledge.
Fang, T. (2016). Profit-sharing: Consequences for workers. IZA World of Labor.