Profit Sharing Definition

Profit sharing is a way for a business to share a portion of the profit it has generated with employees.

Profit Sharing Expanded Definition

Businesses can voluntarily share a portion of their profits with employees. A formal document known as a Profit Sharing Plan must be drawn up outlining terms for participation, funding, and distribution.

Usually, businesses calculate profit sharing based on a percentage of an employee’s annual pay.

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Last Updated By

Christan Neff | Apr 17, 2023

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