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

Depending on your line of work, your salary may be supplemented by commission, an added monetary bonus that is paid to you based and dependent on your performance for that month, trading period or quarter. This is particularly common within sales-focused roles, meaning that tough targets and focus on selling are key to ensure earning potential.

However, 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 where the profits the business makes is put into one pot, divided up amongst employees, and paid as one lump sum, often as a percentage of a salary. How much or how little a worker will receive depends entirely on the success of the business as a whole and their individual impact.

What are the benefits of a profit share scheme?

Well, for one thing, it takes the pressure off a little. Of course, salespeople and those in other target driven professions love a challenge – don’t worry, profit share won’t take that away from you! You’ll still have to work hard to ensure that your bonus, and that of your team, is as good as it can possibly be.

That being said, profit share means that you don’t have to worry too much about not being able to pay your bills or facing financial difficulty if you have an ‘off month’. Taking time off, illness or large deals falling through due to unforeseen circumstances could all have a catastrophic effect on a commission package, but a profit share scheme will be a lot more forgiving.

It promotes a sense of teamwork and co-ownership. Large companies such as John Lewis implement a profit share bonus 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. Plus, no one can swoop in and steal your commission!

What about commission?

Commission is usually paid in small, regular amounts, be that weekly, monthly or quarterly. Due to this, it can soon become swallowed up by regular, mundane expenditures such as bills, food and petrol – boring! The fact is that commission can start to feel normal, and you don’t notice the benefits of it so much. However, profit share schemes are commonly paid after a longer period, often annually. This means that you’ll be receiving one significant lump sum once a year. So, whatever it is you have in mind, a wardrobe makeover, a once in a lifetime holiday, paying off part of your mortgage, a new car or even just paying off that credit card bill that’s been looming over your head – it’s a much bigger incentive to work hard and is much more rewarding than receiving small sums often.

How can a profit share scheme help your business?

Managers, having a profit sharing plan can help a business to run more smoothly. This kind of bonus 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, rather by living 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 any new strategies or make a considerable impact.

But what does this mean to employees? They will feel more secure in a company that is seeing the bigger picture rather than monthly figures. Employees are also more likely to feel motivated and they’ll want to stick around for that lump sum!

Bringing it all together

So, yes, while commission has its benefits, profit share schemes can really make a noticeable impact on your working and personal lives. When it comes to bonuses, maybe it’s time for out with the old and in with the new!

Do you like the sound of a profit share? Many of our clients offer these bonuses to all of their employees. Take a look at our Professionals vacancies now, a career-boosting opportunity could be just a click away!

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