Profit-Sharing Plan

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Profit-sharing plan

An incentive system providing that employees share in companys profits through a cash fund or a deferred plan used to buy stock or bonds.

Profit Sharing

A plan by which an employer distributes a set percentage of the company's profits to its employees. Employers may distribute the portion of its profits immediately (that is, employees may receive what amounts to a bonus) or it may set up a series of accounts for employees and defer the profit sharing until employees retire. The idea behind profit sharing is to give employees an incentive to work for the company's profitability. See also: DPSO, ESOP.

profit-sharing plan

A savings plan offered by many firms to their employees in which a part of the firm's profits is funneled into a tax-deferred employee retirement account. These plans give employees additional incentive to be productive.

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