Compare the details and benefits of a profit sharing plan with those of a stock option plan.

Question

What will be an ideal response?

Answer 1

Both profit sharing and stock option plans increase employee engagement by
giving them a stake in a company’s success. The primary difference between profit
sharing and stock option plans is that in profit sharing, the employee does not make
decisions or manage their benefit, whereas they must direct their own involvement in
stock option plans. Profit sharing is a simple calculation of what an employee receives
out of a company’s profits; said benefit is automatically distributed to employees as a
part of compensation or through bonuses. An employee may have to wait several years
to get access to this benefit. Stock option plans give employees a voluntary right to
purchase company shares; they may choose not to participate at all. The level at which
they can participate is determined by their salary and hierarchical place or seniority in
the company, with more options available to those higher up.