Profit sharing

History

American politician Albert Gallatin had profit-sharing institutions on his glass works in the 1790s. Another of early pioneers of profit sharing was English politician Theodore Taylor, who is known to have introduced the practice in his woollen mills during the late 1800s. In the United Kingdom, profit-sharing became prominent in the 1860s. In 1889, economist Nicholas Paine Gilman documented 135 cases of profit-sharing in the United States and Europe.

Economists debated profit-sharing in major economic journals in the 1880s. William Cooper Procter established a profit-sharing plan in Procter & Gamble in 1887.

Profit-sharing has historically been a prevalent practice in the Hollywood motion picture industry. Profit-sharing partnerships are also prevalent in industries such as law, accounting, medicine, investment banking, architecture, advertising, and consulting.

The Harvard economist Martin L. Weitzman was a prominent proponent of profit-sharing in the 1980s, influencing governments to incentivize the practice. Weitzman argued that profit-sharing could be a way to reduce unemployment without increasing inflation. Economists have debated the effects of profit-sharing on different outcomes.

United States

In the United States, a profit sharing plan can be set up where all or some of the employee's profit sharing amount can be contributed to a retirement plan. These are often used in conjunction with 401(k) plans.

Gainsharing

Gainsharing is a program that returns cost savings to the employees, usually as a lump-sum bonus. It is a productivity measure, as opposed to profit-sharing which is a profitability measure. There are three major types of gainsharing:

• Scanlon plan: This program dates back to the 1930s and relies on committees to create cost-sharing ideas. Designed to lower labor costs without lowering the level of a firm's activity. The incentives are derived as a function of the ratio between labor costs and sales value of production (SVOP).
• Rucker plan: This plan also uses committees, but although the committee structure is simpler the cost-saving calculations are more complex. A ratio is calculated that expresses the value of production required for each dollar of total wage bill.
• Improshare: Improshare stands for "Improved productivity through sharing" and is a more recent development. With this plan, a standard is developed that identifies the expected number of hours to produce something, and any savings between this standard and actual production are shared between the company and the workers.{{Citation

References

References

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2. Monroe, Paul. (1899). "Profit-Sharing and Cooperation. I". American Journal of Sociology.
3. Monroe, Paul. (1899). "Profit-Sharing and Cooperation. II". American Journal of Sociology.
4. Moffatt, Mike. (2008) [[About.com]] ''[http://economics.about.com/od/economicsglossary/g/sharingrule.htm Sharing Rule] {{Webarchive. link. (2016-03-03 '' Economics Glossary; Terms Beginning with S. Accessed June 19, 2008.)
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6. Dean, Adam. (2016). "From Conflict to Coalition". Cambridge University Press.
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10. Gilman, Nicholas Paine. (1889). "Profit Sharing Between Employer and Employee: A Study in the Evolution of the Wages System". Houghton, Mifflin and Company.
11. Giddings, Franklin H.. (1887). "The Theory of Profit-Sharing". The Quarterly Journal of Economics.
12. Aldrich, Richard. (1887). "Some Objections to Profit-Sharing". The Quarterly Journal of Economics.
13. {{britannica. 477828. William Cooper Procter
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