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Gainsharing and profitsharing are not the same things Essay

Very often people mix up the concepts of gainsharing and profitsharing thinking those are the same things. Yet, this is a mistaken conviction, since the above mention phenomena though have a lot in common, but still have to be differed from one another.

Profit is an economic term, which refers to the sum of money that remains after all the expenses are subtracted. Gross profit does include taxes, while net profit doesn’t. Simply saying, profit is an economic category that shows the functional effectiveness of an enterprise. Profit is always represented in accounting documents and is material category, which can be easily calculated. The best example of profitsharing is bonuses, which employees get depending on their contribution to the overall performance or specific project. Profitsharing is strictly referred to financial (material) assumption.

Gains are much broader category, which contains both material and immaterial things like goodwill, reputation, brand name, popularity etc. Gains are everything that improves firms status, image, financial stability. For example, good image of the company substantially facilitates for its employees the process of potential customers and partners attraction and involvement into business, since the latter already trust this firm as the player with strong reputation ad principles. Strong reputation,

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in turn, might increase the value of the company and subsequently reflect positively on company’s share prices. The latter not only strengthen enterprises financial stability and reflect on higher share dividends.

In such a way, the difference between profitsharing and gainsharing is quite clear and obvious. The former is referred to some monetary basis that employees get usually at the end of certain financial period. The latter can also possess immaterial character and be expressed in such categories as better reputation, stronger brand, enhanced trust and sound popularity. Ultimately, the gainsharing might not reflect in accounting documents while profit always does.


Dosi G. (2001) “The nature and dynamics of organizational capabilities” Oxford University Press, Oxford, England

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