Employee acquisition, retention and loyalty
In a context where, despite a shortage of skilled labor, high employee “volatility” and the significant costs associated with training new talent in the hiring process, companies need to remain competitive with their competitors. As a result, many employers are being encouraged to implement innovative programs to attract and retain key employees and stand out from the crowd. With employee well-being and corporate culture increasingly paramount for job seekers, some companies, whether or not through the development of an employer brand, are notably adopting unlimited leave programs, while others are opting for flexible working hours or even offering a 4-day work week. These incentives are designed to attract potential candidates and keep old and new employees happy.
Many employers are also thinking of setting up so-called “profit-sharing” plans for their key employees.
This is what we will focus on in the following series of articles.
What is a profit-sharing plan?
Although the term is little-known, the profit-sharing plan is very popular with companies.
In fact, it’s a strategic approach designed to stimulate employee satisfaction, motivation and, ultimately, loyalty by associating them with the company’s performance.
It can take different forms depending on the situation, such as the allocation of shares, stock options or bonuses based on company profits.
Depending on the situation, these plans are generally put in place to foster employee commitment and reinforce their sense of belonging and behaviours aligned with the company’s objectives.
In this way, they can contribute to the retention of top talent, a crucial issue in today’s competitive environment.
From a tax point of view, profit-sharing plans can offer advantages for both employer and employee.
However, they can be complex to set up and administer, and require careful thought.
So how do you attract and retain employees over the short and long term using these plans?
Over the past few months, Demers Beaulne consultants have had the opportunity to assist a number of companies with the implementation of various profit-sharing plans.
To help entrepreneurs with their analyses and reflections, our team has prepared a series of articles that trace and highlight the major managerial reflections and practices experienced by companies and entrepreneurs during the implementation of some of these programs.
These articles are intended more as a summary of the various important conceptual elements that enrich the thinking and vision of entrepreneurs than as a review of all the accounting and tax considerations applicable to these plans.
Since every company is unique, each profit-sharing plan can be tailored to the needs and objectives of the employer.
Whether a company is large or small, a start-up or an established player in its industry, it’s possible to set up a plan that sets an employer apart and encourages the acquisition and retention of talent.
This series of articles will cover several different employee profit-sharing plans:
- Incentive and bonus programs;
- The strategy of freezing and issuing new shares;
- Stock option programs;
- Phantom share and phantom unit plans;
- Employee benefit trust.
A sixth article will be devoted to employee group trusts.
This new regime was announced in the 2023 federal budget and came into effect on January1, 2024.
Although other profit-sharing schemes exist, the plans presented here are the most common and most likely to be set up in private companies of all sizes and in all sectors.
If you have any questions or need advice, please do not hesitate to contact our Canadian tax team.
