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The amount that Billy Freniere's employer contributes to his retirement plan is based on the business's profitability. Billy's retirement plan is the profit-sharing program.
What kind of retirement plan is a profit-sharing plan?
An employer or business owner can offer employees a percentage of the company's profits equal to up to 25% of their income through a profit-sharing plan, a sort of retirement arrangement. Any size of business is eligible to take part, and the employer alone determines the annual amount that must be set away.
What fundamental flaw exists in profit-sharing arrangements?
Profit sharing may raise compensation risks for workers by making pay less liquid. Profit sharing may come with hefty administrative expenses. There is a poor correlation between unionization and profit sharing because the majority of unions reject these organizational incentive structures.
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