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Small Practice Employee Profit Share Scheme

Small Practice Employee Profit Share Scheme

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I am thinking about introducing employee profit share scheme. This is for employee retention and motivation. 

Have you introduced such a scheme in your practice? Has it worked? 

Any pointers you can provide on the implementation of this scheme? For the moment, all I have is an idea. Is it a good idea?

Replies (10)

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By KPEM online
03rd Mar 2016 20:26

Thinking the same First Tab but havent looked at it in depth. No idea where to start or if it would be too time consuming to manage.

Thanks (1)
By cheekychappy
03rd Mar 2016 20:43

If you openly admit that you struggle to meet the market salary for staff, how will you afford monetary incentive schemes?

Thanks (3)
By FirstTab
03rd Mar 2016 21:37

Profit sharing – how it works

This is worth a read

cheeky - the idea is to share the profit as it increases. This in turn, may improve loyalty and motivation. 

At this stage, like KPEM, I am exploring this option. 

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By ShirleyM
04th Mar 2016 07:19

I would think ...

... that you would still need to offer a competitive wage in the first place though.

Unless the promised profit share is quite substantial, I doubt that many good accountants or employees would be happy with low pay in exchange for a weak promise.

I'll repeat what I've said many times before, if the low paid person is doing all the fee generating work, then it will be very difficult to prevent them feeling undervalued.

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By cheekychappy
04th Mar 2016 10:17

Profit sharing is not a substitute for giving someone the market rate for the job they are doing.

I think any accountant would feel insulted that someone offered them a crap basic that was topped up by a profit sharing scheme. They are professionals and are not selling sofas at DFS.

I have had profit shares as part of my salary packages when I was in employment. But this was always in addition to a decent salary.

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By ireallyshouldknowthisbut
04th Mar 2016 10:23


How about:

1. Paying 'em properly in the first place

2. Bunging them a couple of big ones at Xmas if they have been putting in the effort and not titting about on the internet like their boss at the back end of the year.

Works for me to keep 'em sweet in Jan.  They can leave in Feb of course, easier to replace!

if you give your staff a £100 Xmas bonus having just billed £20k for you in December yes they will get the hump, cut them in £2k and you will have some happy staff. 

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Hallerud at Easter
04th Mar 2016 11:01

The catch is that initial effect

The catch with  such schemes is that  the initial positive effect may tend to diminish with time and if the"perceived" entitlement later fails to come to pass (targets missed etc) then a badly structured scheme can end up being worse than having no scheme, accordingly you are sensible to think it through very carefully in advance.

I was the beneficiary of  such employer generosity in the 1990s that did not come to pass, a lot of promise and little delivery- as a result I left somewhat disillusioned.

I set up  a scheme for one company I worked for in the early 1990s( retail clothing ) with mixed results, although measurement against targets sort of worked (Set monthly thresholds for each shop and staff shared 10% of sales revenues over targets in pre arranged  ratios (Manager/assistant manager/ assistants)), such schemes will only be  accepted by staff if target setting is deemed fair- the subjective part can be difficult.

The difficulty that an accounting practice has over  say the sale of pullovers is the quality control of the service. In retail either number of units shifted or money received can be used as the performance measure, give or take increasing either tends not to impact the quality of the delivered product. But accounting services are different, if one motivates via time taken/fees earned then the  "perceived" increase in productivity may run hand in hand with a diminished product quality ( Why check A,B, C and D if the time taken reduces my profit share?)

Also not sure that profit measurement is the way to go with all staff, for owner managed business entities choices made by the owner may have a significant impact on the operating profit, as these choices are outwith the control of the staff measuring by  accounting profit may be grossly unfair. By fees issued is  more within employee control but even here "serpents lurk", if one member of staff has a client portfolio of cleaner/easier clients, then his throughput may be much better than his harder working colleague who seems to have the client portfolio from hell- if perceived injustice re work allocation the scheme may  also well falter.

I have no silver bullet but I do think the first thing is to fit the scheme to the working practices of your organisation, imho appending an alien  scheme to your practice is the fastest way to disaster, so any scheme I believe has to be in sympathy with how things currently operate and needs to be fair and seen to be fair. Good luck.

Thanks (1)
By FirstTab
04th Mar 2016 12:33


Most of the assessments based without any information as to how much I pay.  Currently or in the past. I will take these on board from the wise and well informed. 



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By cheekychappy
04th Mar 2016 12:57

You have blogged that you could not match the offer that your former employee had received from another practice. He left for the better wage.

You have blogged that you couldn’t match the salary that M was on at her then current employer. Despite that, she still came and worked for you. But that was short lived.

Those two instances, along with your use of unpaid interns gives me the impression you don't pay very well.

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By Glenn Martin
04th Mar 2016 13:51

It used to work for me.

I once worked another accountant, he moved out of the practice to pursue other interests, and I took over running his practice.

I got a market rate salary plus 20% of profits to do so.

The 20% was potentially quite a lump sum and I used to kill myself signing up new work and boosting fees.

When i was manager i used to get paid 30% of first year fee for any job I brought in directly which again was a good money spinner for me and knocked on a lot of doors to get the work signed up.

He was happy as was getting 80% of a bigger pot for not doing too much.

With you however I would imagine it would be a different story. You often post about how your earnings are poor for hours you work so how would you give profits away if they are not that great anyway. 

Bonus schemes are very good if set up right and should give you staff a good boost, however they have to be attainable and you have to honour the commitment.

As the worst thing you do is get someone to hit the targets then you welch on your side.

Its happened to me a few times and its the dirtiest trick there is.


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