Which of the following best describes profit sharing?
A) a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard
B) incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary
C) a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of profit to employees
D) a combination of performance measures directed toward the company's profit and used as the basis for awarding incentive pay
E) an incentive plan where a percentage of the previous year's profits is provided to the employees as a part of their salary

Question

Quizplus · Accepted Answer

Profit sharing is an incentive pay program in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. Option A describes a gainsharing program, while option C describes a group incentive program, and option D describes a performance-based incentive plan. Option E is not a common practice for profit sharing as it suggests providing profits as a part of the salary rather than a bonus.

Which of the Following Best Describes Profit Sharing