Win-sharing awards are performance-based bonuses or rewards given to employees based on the company's overall success. These awards are typically tied to achieving specific performance targets, like exceeding revenue goals, hitting market share milestones, or achieving operational efficiency improvements.
Funding for win-sharing awards comes from company profits or revenue that exceed predetermined targets. The company sets aside a portion of this excess profit to distribute among employees, typically as a percentage of their salary or a fixed amount.
Therefore, while employees' work contributes to the overall success of the company, their individual work contributions aren't directly measured or used to calculate the amount of their win-sharing award. Instead, the award is based on the company's overall performance against predetermined goals.
Think of it this way: Imagine a team working on a project. The team's success depends on each member contributing their skills and effort. If the team exceeds its goals, the company might reward the entire team with a bonus. This bonus is not calculated based on individual contributions but on the team's overall success.
In conclusion, win-sharing awards are not funded by individual work contributions but by company profits generated through the collective effort of all employees. They represent a shared reward for achieving collective goals and incentivize employees to work together towards the company's overall success.