Poll of the Day > Profit sharing.

(+) Yeah! (+)

Why isn't this done more? I mean, of course besides greed.

We have a minimum wage in this country, and currently tons of conflict over what that should be, what a living wage is etc. This means we do have the ability to enforce rules on employers.

Profit sharing would solve most of the wage problems in a far better way then just raising the min wage drastically in a short period of time. Having people working at Mc Donalds making more then EMTs seems wrong, even if the EMTs often don't mind.

Profit sharing, even at fast food levels, can accomplish the same effect, increase motivation of employees, and really only take a tiny % of the profits away from a company.

For instance a Mc Donalds that did a program like that (based on each stores profits), could end up giving about $500 extra per month, per employee (possibly more, but that is a conservative estimate).

If the employees normally got around $10 an hour, that is almost a 50% increase in total income (also brings it pretty close to $15 an hour).

The way it works is the expenses to run acompany, pay salaries (including a fair amount for the owner, not to exceed 10x the lowest paid employees pay per hour) and losses are taken out of the gross profit.

You then take 5% of what is left and split it between the employees based on the # of hours they worked. The positions, salaries etc, have no effect on the share of profits.

Now it wouldn't work for all jobs (Gov jobs etc that don't generate a profit for instance), but it would certainly change things in a positive way, without causing any of the problems suddenly jumping min wage can create.

In my area for instance there is currently a huge range of jobs that all make between $11 and $12 an hour. Even skilled positions (people with seniority), in many of those positions are still making the same amount (as just due to the min wage increases, people who worked at a job that made initially $9 an hour and got raises over a decade, didn't just get a new bump in pay).

I'm not saying minimum wage should not be increase, it should actually reflect a base pay required to live in your area (and be primarily calculated on rental costs). I do think using profit sharing would probably actually increase productivity and profits, possibly enough to offset the actual amount paid to employees....and it would be universal no matter what your current pay rate is.
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wolfy42 posted...

Why isn't this done more? I mean, of course besides greed.

Because profits are already being shared with the investors. Companies with profit-sharing -- as I understand it -- are usually ones without investors where the employees are effectively the owners/investors, having a direct stake and say in the company's operation.

And, broadly speaking, wage standards are one of the bigger reasons why it's not done. It's not much different than paying a supplier -- why would you pay more than you have to? Having more money to go around means you can invest in your operations, lower prices to undercut competitors, carry more inventory, etc. And keep in mind that the overall profit margins -- not to be confused with the product markup -- for a lot of industries are pretty thin.

wolfy42 posted...

Profit sharing would solve most of the wage problems in a far better way then just raising the min wage drastically in a short period of time. Having people working at Mc Donalds making more then EMTs seems wrong, even if the EMTs often don't mind.

I don't think you understand how McDonald's actually works. What McDonald's corporate makes is irrelevant to what a franchisee employee is being paid. McDonald's corporate's customers aren't the guys walking into the restaurants (except for 5% of locations in the US), it's the restaurants themselves who pay fees and buy product.

wolfy42 posted...

If the employees normally got around $10 an hour, that is almost a 50% increase in total income (also brings it pretty close to $15 an hour).

The way it works is the expenses to run acompany, pay salaries (including a fair amount for the owner, not to exceed 10x the lowest paid employees pay per hour) and losses are taken out of the gross profit.

Gross profit shouldn't be confused with net profit. You can have a positive gross profit but a negative net profit depending on the overall cost of your operations. Paying additional compensation on gross is generally stupid.

In general, if they wanted to pay a bit more, they could pay a bit more. You don't need profit sharing to compensate employees better.
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Profit sharing does encourage productivity. Most people don't give a shit about their job because why should they.
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TheCyborgNinja posted...

Profit sharing does encourage productivity. Most people don't give a shit about their job because why should they.

Promotions, raises, and bonuses, for starters.
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Zeus posted...

TheCyborgNinja posted...

Profit sharing does encourage productivity. Most people don't give a shit about their job because why should they.

Promotions, raises, and bonuses, for starters.

This is very dependant on your employment, particularly in high demand jobs where employers can turn over employees regularly.
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Kyuubi4269 posted...

Zeus posted...

TheCyborgNinja posted...

Profit sharing does encourage productivity. Most people don't give a shit about their job because why should they.

Promotions, raises, and bonuses, for starters.

This is very dependant on your employment, particularly in high demand jobs where employers can turn over employees regularly.

Technically promotions are always on the table (unless you're the sole employee), but some jobs take longer for the availability to become open. In general, though, if you always do your best, you're more likely to have a good outcome.
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