5 ms·

Why not have the employees participate in a profit sharing program? On a quarterly or annual basis, any profits over a minimum level get split so a percentage

by Osiris 11y ago

Why not have the employees participate in a profit sharing program? On a quarterly or annual basis, any profits over a minimum level get split so a percentage gets put into a pool and distributed to employees as a bonus. This distribution could be based on salary or just an even split. The advantage here is that employees are 1) rewarded for the work they do, and 2) shows that the company understands the value that they bring, 3) the employees become invested in the success of the business because they benefit directly from it (as opposed to a flat "10% bonus based on salary"). As an employee myself, it's hard to look at companies that make massive profits but don't reward those responsible for helping make that happen (the labor force). One could argue "anyone could do that job", or "if it wasn't him it would be someone else", but that doesn't matter. Just because you CAN take all the profits for yourself doesn't mean that you should. From an economic perspective, funds going to employees are turned around in the economy and generate more economic activity that money sitting in your bank account.

throwaway879168 11y ago
Certainly if I did decide to start paying considerably above-market rate, I would do it in the form of profit sharing, because anything else would be taking a considerable risk should profits decline. However, there's still the question of whether that's the thing to do. I mean, certainly it would be a nice thing to do. But so would giving more to charity, or to my parents. Or lowering the price of our product for that matter. The only difference is that, as you say, the employees help generate those profits. But only to a point; the first developer I hired was after the company was profitable, and she's actually moved on to her own startup. So it would be more about sharing the current wealth than rewarding people for getting us where we are. Still, obviously it's something I'm considering, or I wouldn't have posted. And I guess it doesn't have to be all or nothing; I can obviously choose to share any amount of the profits. Really don't follow the last argument. I would hope if my employees got a sudden large raise, they would put most of that money into their own retirement savings, rather than just increasing their spending. But even if they didn't, by your argument the best thing I could do would be to just blow the profits myself buying cars or whatever. I think the money does the economy just fine in an investment account, providing capital to public companies and the government.
- Osiris 11y ago
  The last argument was really more of a macro view. Economists have shown that reducing wealth inequality actually increases economic output more. For example, for someone that makes $10k a year, give them an extra $10k, that whole $10k is going back into the economy as an increase in demand. For someone making $100k, maybe 50% of an extra $10k goes back into circulation through spending, for someone making $1m/yr, the extra $10k does nothing to increase demand. Economic activity = spending. The more wealth that's concentrated in investments and saving, the less is available for increasing economic output. This type of argument is used to explain how an increase in the minimum wage would actually make the economy better for everyone, not just those that get the pay increase. Simple supply and demand. Increase demand (higher income for laborers) increases supply (which increases employment by requiring more workers). Think of it another way, would $10k make a bigger difference to your employee or to yourself?

by Osiris 11y ago

throwaway879168 11y ago

Certainly if I did decide to start paying considerably above-market rate, I would do it in the form of profit sharing, because anything else would be taking a considerable risk should profits decline. However, there's still the question of whether that's the thing to do. I mean, certainly it would be a nice thing to do. But so would giving more to charity, or to my parents. Or lowering the price of our product for that matter. The only difference is that, as you say, the employees help generate those profits. But only to a point; the first developer I hired was after the company was profitable, and she's actually moved on to her own startup. So it would be more about sharing the current wealth than rewarding people for getting us where we are. Still, obviously it's something I'm considering, or I wouldn't have posted. And I guess it doesn't have to be all or nothing; I can obviously choose to share any amount of the profits. Really don't follow the last argument. I would hope if my employees got a sudden large raise, they would put most of that money into their own retirement savings, rather than just increasing their spending. But even if they didn't, by your argument the best thing I could do would be to just blow the profits myself buying cars or whatever. I think the money does the economy just fine in an investment account, providing capital to public companies and the government.

Osiris 11y ago
The last argument was really more of a macro view. Economists have shown that reducing wealth inequality actually increases economic output more. For example, for someone that makes $10k a year, give them an extra $10k, that whole $10k is going back into the economy as an increase in demand. For someone making $100k, maybe 50% of an extra $10k goes back into circulation through spending, for someone making $1m/yr, the extra $10k does nothing to increase demand. Economic activity = spending. The more wealth that's concentrated in investments and saving, the less is available for increasing economic output. This type of argument is used to explain how an increase in the minimum wage would actually make the economy better for everyone, not just those that get the pay increase. Simple supply and demand. Increase demand (higher income for laborers) increases supply (which increases employment by requiring more workers). Think of it another way, would $10k make a bigger difference to your employee or to yourself?