A company's competitiveness is directly linked to its people's level of commitment to its strategic objectives. This means that the more involved employees are with their work, the more productive they are. But to involve and engage them, you need to go beyond basic people management policies.

That's why many companies have adopted the 3- Profit-sharing as a strategy for valuing its internal public and thereby obtaining the much sought-after commitment. However, a profit-sharing program cannot be launched at random; it must be aligned with the company's strategy and help it achieve its business objectives.

People management as a competitive factor

It's no secret that intellectual capital is the most important asset for a business. Attracting and retaining talent, qualifying your team so that they perform well, investing in incentives that make these people really get involved and committed to the company is fundamental if you want to guarantee the success of your enterprise. And that's where people management policies come in. strategic remuneration.

Download our ebook: Step by step to set up a strategic remuneration policy

Since it's not always possible to offer salaries above the market average, the healthiest way for both the company and its employees to maintain financial balance and labor relations has been to use the PLRThis is distributed according to the company's results. As it is not subject to income tax or other levies, it is more advantageous for both the company and the employees than a small salary increase each year.

By offering profit-sharing, the company generates the involvement it seeks, reduces labor costs, attracts and retains talent and thereby increases its competitiveness in the market.

Why profit sharing is beneficial

As we have already said, one of the great advantages of PLR is the no taxation. What's more, all the company has to do is register its desire to share the profits with its employees in the Collective Bargaining Agreement (CCT) and that's it. There is no bureaucracy involved in implementing this incentive in the company.

When hiring, the company can highlight this benefit to candidates, attracting more qualified professionals and thereby building a solid team committed to organizational results. In addition, waiting for the PLR every six months or a year keeps the team motivated and constantly improving, after all, if the company's results aren't good, the PLR won't be either.

As the PLR is linked to results, the company has greater power to negotiate with employees in relation to individual and collective goals, resulting in greater integration and collaboration between teams. In other words, everyone pitches in to achieve results and thus earn their well-deserved share of the profits.

See also: "What's the difference between PLR and Bonus?"

The downside of PLR

Obviously, there are some cons to adopting PLR as a form of compensation. strategic remuneration. The biggest barrier faced by companies is the development of a suitable tool for assessment of the employee’s past performance of employees in order to identify who really contributed and who didn't in order to achieve the results, which results in the company distributing profits equally among all employees, without distinction.

This policy ends up weakening the validity of the PLR, since people know that regardless of their performance they will receive it. variable remuneration. The company's objectives also end up not being achieved and profit-sharing becomes a must, but without bringing any return on investment.

Read also: "How to set up a meritocratic model correctly"

To implement or not to implement PLR?

If you have well-defined strategic objectives and the profit-sharing program meets those objectives, you should implement it. But don't forget to use a performance evaluation tool that requires your employees to make a continuous commitment to their activities, a continuous search for improvement. Only in this way will people realize the value of the incentive you are giving them and become more committed to the company.

And speaking of performance reviews, each employee at your company should have goals to achieve in order to receive the PLR. With that in mind, how about learning how to break down goals? We'll teach you in this post!