To be effective, a corporate incentive program should include everyone from non-exempt employees to managers and executives. Two common variable compensation systems for companies are profit sharing and employee stock ownership plans.

As the name suggests, profit sharing is a system for distributing a portion of a company's profits to employees. Typically, the percentage of profits distributed to employees is decided by the end of the year before the distribution, although both the timing and amount of the payment can be decided later.

When introducing a profit-sharing plan, companies should pay particular attention to how it is explained to employees and how open management is about the company's financial performance.

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