How To Implement a Profit Sharing Plan.

A lot of clients asked me about profit sharing - Hence, I found this great article written by Peter VanDen Bos for Inc. Magazine.

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How to create a profit sharing plan that motivates your employees and drives revenue.

A smart CEO understands that employee performance is tied directly to how vested they feel to the company they work for. That's why many companies have begun to consider profit sharing plans, because they can be a powerful incentive for employees to work harder for the company and gain a sense of satisfaction from knowing they'll all get a cut of the profits. It's also likely that the added productivity will increase the overall financial performance of the company.

Sue Holloway, an expert in compensation at WorldatWork, a human resources organization focused on employee benefits, explains that the objective of a profit sharing plan "is to foster employee identification with the organization's success." By implementing such a program, the CEO is saying, "We're all in this together, and everybody's focused on profit," says Holloway.

Recent statistics show just how popular variable pay programs, including profit sharing plans, have become. Eighty percent of businesses surveyed by WorldatWork reported having some sort of incentive or bonus program in 2009. So how do you make sure your plan will achieve financial results for your company, while increasing employee productivity and morale?

First, make sure you're profitable. And make sure you expect to continue making money for at least the next three years, to the best of what you can anticipate, says David Wray, president of the Profit Sharing/401k Council of America, a national nonprofit association of 1,200 companies committed to those employee benefits. "If you announce the plan and you have no profit sharing for a couple of years, it loses its credibility as a motivating force," Wray explains. "If you have a bad year and you don't pay that year, then people usually get it."

please click here to read the rest of the article in INC. magazine.