How Florida businesses can use revenue and profit-sharing plans to retain employees and increase their value

Written by Brian H. Hardman, CM&AP

As business advisors, we often receive questions from business owners and business buyers seeking suggestions on how to retain long-term talent. Florida is a major hub for businesses of all sizes, and many of these businesses rely on a skilled and experienced workforce to operate their businesses. However, Florida businesses can face challenges in attracting and retaining top talent, as the state has a competitive job market and an increasing cost of living.

One way Florida businesses can address these challenges is by offering revenue and profit-sharing plans to retain employees. These plans allow employees to share in the financial success of the business. In addition to the financial benefits, revenue and profit-sharing plans can also help to improve employee morale and engagement. When employees feel like they are stakeholders in the business, they are more likely to be motivated and productive. This can be especially important in the Southeast, where many businesses rely on a seasonal workforce.

In addition, Florida businesses can take advantage of the state's tax benefits for businesses that offer revenue and profit-sharing plans. For example, Florida businesses can deduct the cost of contributions to employee retirement accounts from their state income taxes. Businesses can also qualify for a tax credit for each employee who participates in a qualified profit-sharing plan.

Here are some specific ways business owners can offer revenue and profit-sharing plans:

Offer performance-based bonuses: This is a simple way to reward employees for their hard work and contributions to the business’s bottom line. The bonuses can be based on a variety of factors, such as individual performance, team performance, or the business’s overall financial performance.  Performance metrics may include sales goals, customer satisfaction scores, employee attendance, and employee punctuality.   Bonuses can be given quarterly, annually, etc.

Implement profit-sharing plans: This allows all employees, regardless of their position, to share in the business’s success. A profit-sharing plan can be implemented in a variety of ways, such as by distributing a portion of the business’s profits to employees each year or by contributing to employee retirement accounts.

According to the Florida Department of Revenue, Florida businesses can qualify for a tax credit for each employee who participates in a qualified profit-sharing plan.  The credit is equal to 5% of the employer's contributions to the employee's account, up to a maximum of $500 per employee.

Create employee stock ownership plans (ESOPs): ESOPs give employees a vested interest in the business’s stock, which aligns their interests with the interests of the business’s owners. It also creates a sense of ownership, pride, and employee camaraderie.  To qualify for an ESOP, the business must meet specific criteria. ESOPs can be implemented in a variety of ways, such as by granting employees stock outright or by allowing employees to purchase stock at a discounted price.

According to the National Center for Employee Ownership (NCEO), the top five industries for ESOP growth are: 

1. Construction
2. Manufacturing
3. Professional and business services
4. Wholesale trade
5. Retail 

Here are four examples of how Florida businesses are using revenue and profit-sharing plans:

1. A small construction company in Naples offers its employees a quarterly bonus based on the business’s revenue. This bonus has helped to motivate employees to work harder and to be more customer-focused.  Bonuses are typically based on clear performance metrics, such as sales goals, customer satisfaction scores, and employee attendance and punctuality.
2. A large theme park in Tampa has a profit-sharing plan that gives all employees a share of the business’s profits. This plan has helped to create a sense of ownership and increase camaraderie among employees.
3. A 15-person boatyard & repair facility in Jacksonville has an ESOP that gives all employees a vested interest in the business’s stock. Some ESOPs may use a combination of cliff and graded vesting to promote longevity.
4. A Miami-based technology company offers a 401(k) match. It is a type of retirement savings program where employers match a certain percentage of the employee's contributions to their retirement plan, up to a limit.

Overall, revenue and profit sharing can be a valuable tool for businesses to retain employees and potentially increase their business’s value. By sharing the business’s success with employees, Florida businesses can show employees their contributions are valued and they are invested in the business’s future.

Be sure to consult with your tax and legal advisors before implementing any plans as this information is subject to change.