Profit Sharing - GCSE Business Definition

Profit sharing is a business incentive programme where a business distributes a portion of its profits to employees. This creates a sense of shared ownership, motivating staff to contribute to the business's success. In GCSE Business profit sharing can be seen as a way for businesses to align the interests of employees with the firm’s financial performance. By sharing profits, employees are rewarded not just with their regular salary but also benefit directly from the business's success, which may improve morale and reduce staff turnover.

This method can vary widely, from the use of annual bonuses based on profits to distributing stock options. It incentivises employees to work towards common business goals.