What is the term for distributing a percentage of a company’s profits to its employees?

The term for distributing a percentage of a company’s profits to its employees is known as profit sharing. This practice is implemented by companies as a way to incentivize employees and enhance their commitment to the organization's success, aligning their performance with that of the company. Under profit sharing arrangements, employees receive additional compensation, usually on top of their regular salaries, based on the company's profitability over a certain period. This method not only rewards employees for their contributions but can also foster a sense of ownership and motivation, as workers see a direct correlation between their efforts and the company’s financial performance.

Wage refers to a fixed regular payment, typically paid on an hourly basis, and does not inherently include the notion of profit-sharing. Commission is a payment made to employees based on the sales or services they generate, while salary refers to the fixed compensation for employment, usually paid on a monthly or annual basis without any direct link to company profits. These terms represent different methods of compensating employees, but they do not capture the notion of distributing profits specifically.