profit sharing

profit sharing


: a system in which employees receive a part of the company's profits

Full Definition of PROFIT SHARING

:  a system or process under which employees receive a part of the profits of an industrial or commercial enterprise

First Known Use of PROFIT SHARING



profit sharing

noun    (Concise Encyclopedia)

System by which employees are paid a share of the profits of the business enterprise in which they are employed, in keeping with a plan outlined in advance. These payments, which may vary according to salary or wage, are in addition to regular earnings. Profit-sharing plans were probably first developed in France in the early 19th century as worker incentives. Today such plans are used by businesses in Western Europe, the U.S., and parts of Latin America. Profit shares may be distributed on a current or deferred basis or through some combination of the two. Under current distribution, profits are paid out to employees immediately in the form of cash or company stock. In deferred-payment plans, profit shares may be paid into a trust fund from which employees can draw annuities in later years.


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