Profit-Sharing Boosts Productivity

Key findings

A new report by the IPPR think tank says that businesses with 500 or more employees should be encouraged to share profits among all their staff; it also shows that profit-sharing boosts productivity and improves the bottom line.

The authors of Sharing Profits and Power argue that ‘shared capitalism’ schemes like profit-sharing strengthen team-working and create better relationships between staff and managers. Employees also tend to work harder and absenteeism is lower.

The report recommends that the government ask representatives of employers, employees and investors to consider ways of advancing the use of profit-sharing and other forms of ‘shared capitalism’ in British workplaces. This could include:

  • Reintroducing income tax exemptions for profit-related pay, or making profit shares exempt from national insurance contributions
  • Allowing employee profit shares to be paid before corporation tax, effectively reducing company tax bills
  • Making profit-sharing compulsory in some companies, for example in very large firms or in particular sectors

The report was funded by Trust for London.

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Profit-Sharing Boosts Productivity

Full report 2.7 MB
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