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In this video, Joe Collins from Avalon Accounting discusses profit sharing in businesses, explaining its definition and potential benefits. Profit sharing is recognized by both small and large companies for its ability to engage employees, as incentives linked to profits motivate staff to contribute more effectively to the business's success. When employees feel that their efforts directly influence their earnings, they are more likely to be invested in the company's performance. The video also touches on potential pitfalls of profit sharing, indicating that while it can enhance profits, it may have downsides if not implemented properly.