What does profit-sharing mean?

Profit-sharing is a retirement plan that gives employees a share in the profits of a company. It is also known as a deferred profit-sharing plan. In this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings.

Profit-sharing plans can be advantageous to employees and employers. It incentivizes employees to work hard so that the company earns more profit so that they can eventually see the benefits of that. This helps the employee and, of course, the employer reaps the benefits as well. It can also be a great way for employers to reward employees.