Profit Sharing Calculator

Formula

The formula to calculate the Profit Share is:

\[ PS = \frac{EC}{TC} \times P \]

Where:

$PS$ is the profit share ($)
$EC$ is the individual employee's compensation ($)
$TC$ is the total compensation of all employees ($)
$P$ is the total profit of the company ($)

What is Profit Share?

A profit share is a percentage of the total profits a company has earned that is distributed to an individual. Typically, profit share is calculated by determining the ratio of the employee's compensation to the total compensation of all employees. For example, if an employee earns 1% of all compensation, they receive 1% of the profits for the year or period. Profits are typically paid out quarterly, annually, or semi-annually.

Example Calculation 1

Let's assume the following values:

Employee's Compensation (EC) = $50,000
Total Compensation of All Employees (TC) = $1,000,000
Total Profit of the Company (P) = $200,000

Using the formula:

\[ PS = \frac{50000}{1000000} \times 200000 = 10000 \text{ dollars} \]

The Profit Share is $10,000.

Example Calculation 2

Let's assume the following values:

Employee's Compensation (EC) = $75,000
Total Compensation of All Employees (TC) = $1,500,000
Total Profit of the Company (P) = $300,000

Using the formula:

\[ PS = \frac{75000}{1500000} \times 300000 = 15000 \text{ dollars} \]

The Profit Share is $15,000.