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Profit-sharing plans allow companies to share profits with employees, either as cash or deferred into retirement accounts. This deferred profit-sharing plan offers a tax advantage as the income earned is not taxed until retirement, when individuals typically fall into a lower tax bracket. These plans incentivize employees to concentrate on the company's overall success instead of just their individual performance, promoting a collaborative work environment. Additionally, profit-sharing plans help align employee efforts with the company's key objectives, enhancing motivation and productivity. Overall, they contribute significantly to a company's profitability and employee engagement.
