Profit Sharing & Gainsharing - HR.com

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Profit Sharing & Gainsharing

Pay based on the performance of the entire organization.


Discussion Question:

What are the advantages and disadvantages of "cash" profit-sharing plans and "deferred" profit-sharing plans?


Gainsharing

Scanlon Plans

Rucker Plans

Improshare


Employee Stock Ownership Plans


Strategic Alignment of Base Pay & Incentive Pay

What factors should be considered in balancing base pay and incentive pay?


Job AClerical position in a credit union

Job BMetal worker in a metal shop

Job CSales supervisor at a used car lot

Profit sharing

Individual incentive

Base pay

10%

5%

85%

Group bonus

Base pay (determined partly by individual performance)

20%

80%

Profit sharing

Group incentive

Individual incentive

Base pay

15%

15%

40%

30%



In fine tuning an incentive system, what problems would occur if excessive weight were placed on individual incentives? on group incentives? on profit sharing? on base salary?


Executive Compensation


Average Annual Pay of Factory Workers, High School Teachers,Engineers, and Chief Executive Officers: 1990-2000

1960 1970 1980 1990 2000 2010

Worker $4,665 6,933 15,008 20,862 28,600 32,840

Teacher 4,995 8,626 15,970 29,143 40,350 54,390

Engineer 9,828 14,695 28,486 49,772 62,760 89,086

CEO* 190,383 548,787 624,996 1.95 mil 12.4 mil 10.9 mil

*Total compensation, including salary, bonus, and stock options.


Stock Options

A stock option is the right to buy a company’s stock at a certain price over a certain period of time, usually ten years.

What rules govern stock options?



What are the implications of reporting executive stock options as an expense?


Employee BenefitPrograms


Required Benefits

Employers are required to provide three benefits that are intended to protect employees’ incomes.

What are the three benefits required by law?


Social Security Benefits

1. Old age or disability benefits

2. Benefits for dependents of retired, disabled, or deceased workers

3. Lump-sum death benefits

4. Medicare


Pension Plans

Defined Benefit Pension Plan

Defined Contribution Pension Plan

What are the differences between these two plans?


Individual Savings Plans

Deferred accounts that are approved by the IRS, called qualified plans, enjoy special

tax considerations.


Pension Protection Act

Allows employers to automatically enroll employees in a 401(k) plan.


Health & Accident Insurance


Income Replacement

Life insurance and income-continuation plans help to

alleviate difficulties.


Paid holidays Paid vacations Paid personal leave Union activities Reporting time Sabbatical leaves Paid funeral leave Jury duty Military Leave

Pay for Time Not Worked


Recognition & Achievement Awards

Organizations use a variety of recognition programs to

influence the attitudes and behaviors of employees.


Health Care Benefits


Maximum freedom of choiceMinimum cost control

Minimum freedom of choiceMaximum cost control

Fee for Service

Preferred Provider

organizationPoint of service

Health maintenance organization

Group health

cooperatives

Managed Health Care OptionsFreedom of Choice versus Cost Control

Profit Sharing & Gainsharing - HR.com

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