How does John Lewis profit sharing with their employees benefit the Literature review

How does John Lewis profit sharing with their employees benefit the company - Literature review Example When the employees get the feelings of ownership, they increase their contribution toward the business profitability. The profit sharing approach works best when the business and the management educate the employees in understanding the business challenges hence work hard to get solutions. There are two way communications that create a hardworking culture; employee involvement and flat management (Melton, Smith & Yates 2008). In this strategy, the employer provides the employees cash and bonuses. The employer pays the workers extra money depending on either their individual level of performance or the company’s performance level. The management will have to deduct the extra payment as an expense but will pay income tax from that amount (Latta 2005). A company can also award the performance-based incentive in the form of deferred compensation plan. In such a strategy, the employer will add a bonus amount to a pension scheme followed by a deduction of the contribution. The employee will then have to pay the income tax that the contribution amounts to when he/she receives the money from the trust. Various researches indicate that cash reward strategies give better productivity motivation than the deferred compensation plans. The difference is explained by the immediacy resulting from the positive behavior reinforcement (Hallman & Rosenbloom 2003). The last method that a business can use in this strategy is the stock option. Developing companies can use this process, but should be in markets that are growing fast. The company awards the employees the opportunity to buy shares at a specified period at a set price. The employees wait until the company executes the plan in order to start getting the benefits. The company offers stock option as a bonus to employees for inclusion in the profit sharing plan (Gitman & Joehnk 2005). One of the major benefits of this strategy is that it is cheap and flexible while implementing. The employer can