Financial Incentives - Profit share 1.4.4

Profit share -  means that an agreed share of the profits is paid to employees.

KEY FEATURES

• Employees have an incentive to be as productive as possible
• Can take the form of cash or share options

ADVANTAGES

1. Creates a direct link between pay and performance
2. Creates a sense of team spirit - helps remove 'them and us' barrier between managers and workers if all employees are involved
3. May improve employee's loyalty to the comany
4. Employees more likely to accept changes in working practices if they can see that profits will increase overall

DISADVANTAGES

1. Not linked to individual performance
2. External factors can reduce profit through no fault of the employees.