Reflection on Thursday's Class

On Thursday, we got into our groups to talk about various ways to give incentives and bonus pay to employees. The two topics our group was given was profit sharing and stock options. I enjoyed reading over the material with my group and learning more about their experiences with these methods of pay.

Profit sharing is an incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. This is a low cost way of giving performance and bonus pay to employees, but can cause problems when the company isn't doing well. If employees begin to feel entitled to profit sharing bonuses, the company morale with go down hard when the company doesn't have anything to give out during hard times. I saw how profit sharing can be good and bad at my previous employment. One of the issues where I worked, was that older more tenured workers didn't like that I got the same share of profit sharing as they did, since they had been there longer.

Stock options include the rights to buy a certain number of shares of stock at a specified price. Companies will offer stock options to their employees as a way to get them to think more like owners, like they have something truly vested in the company. This method can be good to create long term incentive for employees to stay with a company. However, I don't think lower workers with stock options would have a huge connection with the company in that way.