Employee participation in company profits is a significant motivational agent within an organization. Regulated since 2000 by Law 10.101, the Profit Sharing Program (PPR) and Profit and Results Sharing (PLR) are two tools that have become increasingly popular as a way to increase the number of goals and objectives achieved by boosting employee productivity.

But what is PLR and PPR?

Despite the two nomenclatures being similar and being part of a Variable compensation strategy, their applications work differently. PPR is a process that unites income and work, and its main objective is to achieve pre-established goals. Therefore, if the purpose is achieved, employees should receive the salary increase provided by the Profit Sharing Program, even if the company's profit is not achieved. 

In PLR, capital is distributed among employees based on the final profit result obtained by the company. In other words, if there is no profit in the month's budget, there will be no extra income for the workers.

Early records of variable remuneration strategies worldwide

Through decrees, notable figures like Napoleon Bonaparte have already utilized variable compensation strategies. In 1812, the Frenchman granted artists of the “Comédie Française” a portion of the play's profits, after the year-end monetary calculation. 

In a more structured way, in England, participation began to be used as a way to combat strike movements in 1850. In the United States, the idea arrived in 1889.  

Albert Gallatin was the pioneer in implementing profit-sharing in a company. Jefferson's Secretary of the Treasury distributed a portion of the glass industry's profits to employees.

In Brazil, on the other hand, the banking sector was responsible for achieving workers' profit-sharing in companies. Around the 1990s, discussions about a way to remunerate work results began to be held by bank employees. Thus, in 1995, PLR (Profit Sharing) emerged. Since then, the sector has sought advances in the rules to allow for a salary distribution that benefited all workers, regardless of their hierarchical position. 

Initially, negotiations were planned only for private banks. However, in 2003, there was significant progress, and public banks – especially Caixa Econômica Federal and Banco do Brasil – became able to sign the PLR Collective Labor Agreements (CCTs), consolidated between worker representative entities and the National Federation of Banks (Fenaban).

Rules for applying PLR/PPR in your company

First, it's necessary to define a team responsible for program development, with the participation of the employer, workers, and a representative appointed by the trade union. The creation of Participatory Management is positive for both sides, as with a sense of belonging, employees will be more motivated to do a good job.

In addition, setting specific goals and objectives is also fundamental to the success of strategies. By planning indices involving profitability, productivity and deadlines, the company has greater control over results. 

The third phase involves authenticating the program, along with the union. After regularization and disclosure to employees, it is necessary to conduct an inspection and analysis of the results through those responsible for monitoring the strategy indicators. 

The final step of the process is payment. Additional compensation should be made among three options: a fixed amount, without hierarchical distinction; or through a fixed installment for all employees, along with an additional amount proportional to their position and salary. 

Advantages and Disadvantages

When used correctly, Profit Sharing (PLR) becomes a very profitable business for both the company and the employee. If the stipulated profit is not achieved, the company will not have to pay PLR, and consequently, employees will be more motivated to reach the goal and the company will not run the risk of incurring debt. Furthermore, implementing PLR in your company improves service quality and helps alleviate pressure on departments or units.  

However, if applied incorrectly, the program can cause some problems. This situation generally occurs for a number of reasons, such as: employees' lack of interest in engaging in the project, impasses in the relationship with the category's union, or even inappropriate demands from employees.  

The advantages of the Profit Participation Program (PPR), in turn, revolve around the fact that employees, in general, show less resistance to implementing the model, since if they do a good job, extra income is already guaranteed. In most cases, the demand for improvements in the company's system starts from the workers, with ideas to improve the quality and productivity of the service, and the performance of units or branches is easier to visualize.   

However, improper application of the program harms the company's progress, which may have to pay employees even if it's at a loss, in addition to the possibility of competition between units, generating internal conflicts. Therefore, if your company has difficulty implementing any of the programs, the best alternative is to hire a comprehensive business management software. 

How can Actio's software help you implement PPR and PLR in your company?