Employee turnover is a major challenge every business faces, but paving and construction face a higher turnover rate than most industries. Retaining good employees is one of the best ways to keep your business profitable. One of our Pavement Network members, Rainier Asphalt, has used a profit sharing incentive plan to incentivize employees since 2017. According to Owner Tom Merry, the incentive plan has “definitely moved the needle with employee retention and engagement in profitability.”
Below, we’ll examine some points in Rainier Asphalt’s profit sharing incentive plan and a few other incentive plans as well. First, let’s look at what an incentive plan is and what it is not.
What is a Profit Sharing Plan?
- A set plan shared with employees ahead of time that clearly defines how the plan works and what the payouts are based upon.
- The profit shares are dependent upon company sales and preset values.
- They are generally based on employee performance.
- The plan motivates employees when they understand their rewards are directly related to their performance and the company’s overall performance and sales.
What is NOT Considered a Profit Sharing Plan?
- Bonuses given to employees that are not earned through a particular period of time and not planned for ahead of time.
- Bonuses or rewards given for results that are out of the employees’ control.
- Benefits not tied to the company and employees’ performance, like additional PTO, paid vacation days, health and wellness benefits, flexible schedules, etc.
- Pay raises
Profit Sharing Incentive Plan Goals
- To give employees a feeling of ownership in the success of the company.
- To allow employees the possibility to increase their profits directly through their performance.
- To create shared goals and encourage employees to achieve them together.
- To retain great employees by tying rewards directly to their performance and overall company performance and revenue.
Other Incentive Plans
- Project bonuses – Employees receive a set amount at the completion of a project after meeting specific and previously defined criteria.
- Performance bonuses – Annual or quarterly bonuses that are scheduled and advertised to employees and rewarded if employees hit previously defined performance goals.
- Referral Bonuses – These reward any employee a set amount for referring a new client.
Monetary incentives aren’t the only incentives employees value. Other incentives could include flexible scheduling, volunteer days, childcare options, health and wellness options, and company-sponsored events.
Profit sharing incentive plans can be a great way to motivate and retain full-time employees. If you’re interested in setting up a plan, the U.S. Department of Labor has a guide to Profit Sharing Plans for Small Businesses. The IRS also offers some information on profit sharing plans. As always, we’re here to help and encourage one another as part of the Pavement Network.