In the business world, PLR is the acronym for Profit and Results Sharing, a way of sharing the company’s results with employees.
We know that the market’s focus has increasingly been on delivering results, and not just on the number of hours worked. Therefore, to bring everyone together for the same purpose, profit sharing goes beyond a financial incentive and places growth as everyone’s mission. Continue reading to better understand this concept and how and when to apply it to your company!
What is PLR, Profit Sharing and Results?
Profit Sharing (PLR) works as a variable compensation program to reward employees based on the results achieved and the company’s financial performance . The main objective of PLR is to encourage employees and also increase collaboration and motivation to achieve goals.
What is the difference between PLR and PPR?
Although the acronyms are similar, there are differences between the distribution of PLR and PPR profits. Understand.
PLR (Profit Sharing)
The purpose of PLR is to reward employees for their contribution to the company’s profits. It is an agreement that benefits both the company and the employees, encouraging them to improve productivity and the quality of their work.
PPR (Participation by Results)
The purpose of the PPR is to encourage the achievement of specific goals and objectives, previously defined by the company. It is a financial management tool that aims to improve team performance, providing rewards to employees when they achieve the established goals. Its implementation is not conditioned on the company’s profit.
How does profit sharing work?
The adoption of PLR is not mandatory for any type of company, but this benefit works as a great incentive to engage and motivate employees to achieve increasingly better results. The distribution rate can vary, and when defining the PLR percentage, some aspects are usually taken into consideration:
- productivity and quality indexes;
- business growth rates;
- billing values;
- service quality feedback;
- income obtained by the company.
The frequency of PLR payments can vary between one or two installments, with the frequency defined by the company.
What are the most common forms of PLR payment?
The most common forms of PLR payment are generally well defined and can be of three types: individual payment, payment by sector and payment for all employees. The choice should be made based on what the company wants to develop in its organizational culture .
Individual payment
Each employee receives an amount based on their individual contributions to the company. Benefits include:
- direct recognition of individual performance;
- encouraging healthy competition among employees;
- motivating employees to exceed personal goals.
Payment by sector
The PLR is distributed equally among all members of a given sector. Advantages include:
- encourages collaboration and teamwork;
- fosters a sense of shared responsibility;
- reduces harmful internal competition.
Payment for all employees
Every employee gets the same portion of the company’s profits. Advantages consist of:
- promoting equality;
- encouraging team cohesion;
- motivation and engagement;
- improvement of the organizational climate.
In any case, you need to understand the current situation of your company in order to adopt the best PLR payment model. This, of course, involves people management and strategic leadership .
What are the advantages of adopting PLR?
The adoption of PLR, in general, brings several benefits to companies, including:
- achievement of goals and objectives;
- motivation and engagement;
- has no tax burden;
- reduction of turnover ;
- lower absenteeism rate;
- increase in company profits.
What does the CLT say about profit sharing?
The PLR bonus will be distributed among employees who work under the CLT regime. Not all employees are entitled to the PLR, only those with an employment relationship and a formal employment record. Interns, freelancers, outsourced professionals and public servants are not eligible to receive the benefit.
In the event of termination, the employee may receive payment in proportion to the time they remained with the company. Leave due to illness or maternity leave does not guarantee the receipt of the amounts, as it is understood that the employee did not participate in achieving the goals.
What precautions should the company take when promoting PLR?
Promoting PLR requires a series of precautions to ensure that it is fair, transparent and effective:
- Establish clear criteria: distribution criteria must be well defined;
- Transparency: rules and criteria must be clearly communicated to employees;
- Legality: the PLR must comply with labor laws ;
- Measurement of results: measurement criteria must be fair and objective;
- Equity: distribution should reflect employee performance;
- Financial impact: good tax planning and cost management for company stability.
How to calculate the company’s PLR?
The calculation of PLR may vary depending on the company’s policies and goals, but generally follows a simple step-by-step process:
- Define goals and criteria: Clear goals and eligibility criteria should be established, such as those related to revenue growth, profitability, high or low productivity ;
- Calculate net profit: difference between total revenue and total costs;
- Calculate the PLR value: apply a percentage of the net profit;
- Distribute to employees: distribute the total amount of the PLR according to established criteria.