Profit Sharing

Having a financial stake in the company you work for could be a source of motivation. Indeed, compensation strategies that link pay to performance have been found to boost both individual and firm performance. In spite of this, one form of pay for performance – profit sharing – is offered in only a small share of Canadian workplaces. Of course, this type of incentive system is only found in the private sector – the public and voluntary sectors having no profits to share.

Sharing the Wealth: Profit Sharing Most Common in Mid-Sized Firms 

As the above chart shows, only about 8 percent of Canadian workplaces have a profit sharing plan in place. Such plans are least prevalent in small firms and most common in firms with 100 to 499 employees. Many small firms are located in the retail and service sectors (such as shops and restaurants) where profit margins tend to be small. It is interesting to note that profit sharing plans are somewhat less common in large firms than in medium-sized ones (13 and 22 percent respectively). The fact that hospitals and educational institutions which trend to be large employers are operated on a not-for-profit basis probably accounts for some of this pattern.

By Region

Comparing profit sharing plans by region, we find they are slightly more common on the prairies and in Ontario, and least common in Quebec, British Columbia and the Atlantic provinces. It is unclear what accounts for this variation, although the mix of industries in the different regions possibly plays a part.

By Industry

Sharing the Wealth: Relatively Common in Finance and Insurance

The use of profit sharing plans varies by sector of the economy. Such plans are most likely to be used in the finance and insurance industry, where they are offered by about one in seven firms.

Profit sharing plans are often associated with ‘high-performance’ or ‘flexible’ workplaces. Such plans offer the potential to increase employee performance through additional incentives and by tying pay more closely to business results. This may be good for employees when the economy is strong, but if business conditions are poor or the firm is not competitive, there will be fewer profits to share.

Additional Charts and Information