Great now our salaries will be slashed by 25% which will be moved to profit sharing. Then if we do well we get it back and company gets a nice tax credit. If we don't do well the company pays less. Either way a win for the company, not the employee. Also less taxes are raised.

Hillary really does not understand how businesses work.

Basically what I thought on reading that.

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

I try not to pay attention to anything politicians "propose" during campaigns because they typically not thought out so I don't know what she or you are talking about.

However, can you tell what the difference is between this "proposal" and the current 25% deductible limit for profit sharing plans?

Basically, she proposes giving tax credits to companies who start a profit sharing plan. Government will give the business a tax credit in the amount of 15% of the profit it shares, up to 10% of employee salaries.

To use the example from her campaign page, if you make $50,000/year, you could earn another $5,000 through profit sharing, and the government would give your employer a $750 tax credit. For two years. Far as I can tell, the tax credits are temporary.

Looks far better for the company than the employees.

Was this plan the result of her high-fee speeches to GoldmanSachs?

It doesn't seem to make sense the way it is laid out. And her website doesn't make it any more clear as to why companies wouldn't reduce salaries to offset the profit sharing while taking advantage of the tax credit.

I have always thought service industry employers would be well advised to use profit sharing in their pay. Want to have your McD's staff care whether the dipshit in back is playing frisbee with hamburger patties? How about having that guy costing everyone else money? If I owned a fast food joint there is no doubt that I would be giving bonuses based on profitability.

But that plan doesn't make sense.

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I'm beginning to think that we are much more fucked than I thought.

Sounds to me like a fun little corporate handout that ultimately would have little to no real impact on employees. One of those 'good in theory' types of ideas that sounds good on the campaign trail - 'more money for everyone!' - but in practice would do no such thing. It's akin to QE and the easy money on Wall Street, in theory it helps small businesses and individuals but in practice Wall Street just raked in huge profits.

why do you say they'll be slashed by 25%

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Swimming Workout of the Day:

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2020 National Masters Champion - M50-54 - 50m Butterfly

However, can you tell what the difference is between this "proposal" and the current 25% deductible limit for profit sharing plans?

You have all the info I know about it, which is what I got from her website.

Seems like her proposal is intended as an incentive for companies who don't have profit sharing to implement it. Perhaps, then, her 15% limit is in addition to the current 25%? I don't know.

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

Looks far better for the company than the employees.

How so? On paper, seems like the employer would be paying out a lot more than they're receiving in tax credits. Gotta pay an employee 5 grand, get 750 bucks back from the gummint. And only for the first two years- after that, no more tax credit. (Current tax credits aside, as I don't know whether they're impacted by her proposal.)

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

Bingo. What do you bet this proposal was written by Goldman Sachs?

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"In the world I see you are stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You'll wear leather clothes that will last you the rest of your life. You'll climb the wrist-thick kudzu vines that wrap the Sears Towers. And when you look down, you'll see tiny figures pounding corn, laying stripes of venison on the empty car pool lane of some abandoned superhighway." T Durden

There is nothing in there that says the employer cannot reduce salaries to 45k and make the other 5k into profit sharing. They take the tax credit and pay the same. Of course that could be added in but there are ways around that too. Two years later (or whenever the credits expire) back to regular old payroll.

The only real risk is making your employees unhappy, but since they are fungible assets who cares?

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I'm beginning to think that we are much more fucked than I thought.

Looks far better for the company than the employees.

How so?

The employees pay into the profit sharing plan. If the companies profits go up, the company wins and also gets a tax credit. If the company doesn't profit, they pay less tax

The risk is on the employees as they invested their money. I don't see a lot of risk for the company.

Oh, I totally agree with that.

But that's not how Hilary is selling it. On paper. See, you make 50 grand right now. You'd still make 50 grand, PLUS you'd get 10% of that in profit sharing. So you're making 55 grand! The government is going to incentivize your employer to pay you an extra 5 grand by giving them $750! For a couple of years.

See, I think it doesn't make any sense on paper, the way she describes it, because it looks like the employer would be taking a bath. And they sure as hell aren't going to be taking a bath.

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

The employees pay into the profit sharing plan.

I'm missing that part. Help me out, how does that work?

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

The employer pays in, not the employee.

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Swimming Workout of the Day:

Favourite Swim Sets:

2020 National Masters Champion - M50-54 - 50m Butterfly

He's thinking of an Employee share purchase plan....

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Swimming Workout of the Day:

Favourite Swim Sets:

2020 National Masters Champion - M50-54 - 50m Butterfly

Well, the average employee isn't going to take a 1:1 haircut on their base salary to go to an EPSP. if you want me to take a 5K pay cut to put 5K in an EPSP for next year, I'm not agreeing to that. Ask me to take a 2K haircut for a promise of a 4-5K EPSP, then maybe.

For salaried employees, it'll mostly be moving compensation from the Bonus line to the EPSP line.

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Swimming Workout of the Day:

Favourite Swim Sets:

2020 National Masters Champion - M50-54 - 50m Butterfly

Well, the average employee isn't going to take a 1:1 haircut on their base salary to go to an EPSP. if you want me to take a 5K pay cut to put 5K in an EPSP for next year, I'm not agreeing to that. Ask me to take a 2K haircut for a promise of a 4-5K EPSP, then maybe.

Right, I get that. I think the way it's phrased on Clinton's page makes it sound like you won't have to give up any base salary to get the profit sharing- it's all additional money!!

What's the typical trade-off for companies who institute profit sharing? Anyone know?

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

Depends.

in a lot of cases, companies will set up deferred profit sharing plans, and give employees an option of participating in the profit sharing or something else. eg might split their "profit sharing" (aka bonus) 60/40 between cash and the dpsp.

At least that's how it works here. Net effect is that the employee pays less tax now, and the company will get the tax credit and (maybe) save on payroll taxes.

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Swimming Workout of the Day:

Favourite Swim Sets:

2020 National Masters Champion - M50-54 - 50m Butterfly

Come on don't confuse this with the dynamics of the minimum wage and hours worked...oh wait.

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"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

And so take that a step further: if I get an annual bonus of $10K, and the company says 'hey everyone, we're going to instead tie bonuses to profits, so we're all working toward the same goal' then I'm losing that (somewhat) guaranteed $10K bonus and instead hoping the company does well that year to get what had previously been a pretty rock-solid guaranteed bonus. The company doesn't take on any risk in this equation, the way I'm seeing it.

This is largely the way my company operates now, and with the exception of 2008-2009 bonuses have been very reliably tied to salary (10-15% as long as you have solid performance reviews). If instead they shift to a profit sharing model the employees take on the risk that the company has a bad year and rather than budgeting in a bonus pool they don't owe employees shit. At least the way I'm reading this.

The handful of large companies that I know about are already deciding on the total bonus pool after the year end profit projections are complete. The DPSP, if they have one, is more of a tax structuring tool than anything else.

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Swimming Workout of the Day:

Favourite Swim Sets:

2020 National Masters Champion - M50-54 - 50m Butterfly

The employees pay into the profit sharing plan.

I'm missing that part. Help me out, how does that work?

Yep. misread it as a share purchase plan.