What is a Profit Share Scheme and Why is it Better than Commission?

Many businesses are now opting for a profit share scheme in place of the traditional commission structure.

What is a profit share scheme?

A profit share scheme is when the profit a business achieves is allocated amongst its employees and paid as one lump sum, commonly on an annual basis. How much an employee will receive depends entirely on the success of the business and their individual impact.

It also promotes a sense of teamwork and co-ownership. Large companies such as John Lewis implement a profit share scheme; theirs is an annual bonus that is divided among their employees, who are known as ‘Partners’, and they believe that this encourages individuals to take personal responsibility for the collective success of the business. Additionally, if everybody is working towards a shared goal, colleagues are much more likely to support one another and work together to achieve a profit share bonus, whereas in commission-based roles, things can feel a little more like ‘dog eat dog’. It’s much fairer in that everyone is acknowledged for their contributions without having to meticulously evidence them.

Managers, profit share can help a business to run more smoothly.

This kind of reward isn’t a short-lived flash in the pan, it is a long-term goal. It’s much easier to see the bigger picture and complete effective financial planning when you have an annual target to meet. It’s better than working month-on-month which, let’s face it, can often feel like flying by the seat of your pants. Also, if you have a year to work with, it gives you much more time to assess and therefore maximise profits. You’ll have more time to implement new strategies and make a considerable impact.

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