My new firm offers both performance bonuses and profit sharing, but I'm trying to figure out which one puts more cash in my pocket. Info like this makes me think profit sharing benefits the employer more.

Are performance bonuses usually a percentage of your salary? How are they calculated – individual performance, team performance, or firm-wide goals? On the other hand, what percentage of the firm's profits typically gets shared? And how is that distributed among employees?

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In my experience firms are looking at the total package. They’re trying to offer a total rewards package that roughly nets what the rest of the market is paying. The relative mix of offerings just incentivizes the behavior they’re trying to drive.

For example, an entirely discretionary bonus as a % of your salary might not be good at driving certain behaviors if you don’t know what they’re basing the bonus off of. Jimmy threatened to leave earlier in the year, so I spent less bonus money in my available pool on this person and instead used it on Jimmy etc.

A formulaic profit sharing plan at least gives you transparency into what you can expect to receive for that portion of your total rewards package.

Every company is different so can’t speak to how your particular company administers its compensation programs.

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