Giving employees a share in a firm's profits. This may be done either by profit-related pay, or by enabling employees to become shareholders, by giving them either shares or options to buy shares on preferential terms. Profit-sharing is intended to improve motivation by giving employees an interest in the firm's profitability. It is more frequently adopted for management than for other employees, possibly because managers have more influence on profitability than other workers, and may be less risk-averse, so that profit-sharing incentive schemes are relatively attractive to them.
Subjects: Human Resource Management — Economics.