This document discusses current profit sharing compensation plans. It explains that companies set aside a predetermined percentage of payroll, usually between 2.5-7.5% but sometimes up to 15%, as a bonus on top of base salary. These bonuses depend on overall company or line of business profits. The purpose is to encourage employees to understand how their work impacts company performance and profits in order to improve profitability.

1. Current Profit Sharing
Compensation Management

2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

3. 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.

4. 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.

5. 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.

6. 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

7. 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).

8. 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.

9. 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.

10. Current Profit Sharing
• It will also make you look
good to your manager if
you show an interest in
the company's
performance.