Analysis of Economic Factors in a Business

Profit Sharing, Earnings Sharing, Part Rate, Time Clocks and Area Checks

Submitted by Group 6:-

  • Neethi Nair-14020541031
  • Neha Paswan-14020541032
  • Nilesh Tayade-14020541033
  • Nishant Thool-14020541034
  • Nishith Mohanty-14020541035
  • Nitish Vats - 14020541036
  • Akanksha Chaudhary - 14020541065

Profit Sharing:-

Profit sharing will be the commission programs to presented by business companies that provides immediate or indirect income to the employees that is dependent on the business's profit earned, in addition to the employee's regular salary and bonus products.

In general population companies, these are the profitability given to the worker as the equity shares.

Profit sharing strategies are generally based upon the predetermined monetary sharing regulations define how much should be break up between the company as a principal and the worker as an agent.

The manager can use this to enhance workers' attempts making the staff' compensation dependent on the underlying success of the organization. Offering workers settlement that is linked with underlying profitability has an incentive for personnel to place forth more work.

The company can also earn profit from this, by writing the profit with the employees' old age benefit account, which is non-taxable for the business.

Profit sharing is a kind of varying pay, which would depend on the income gained by the business.

Wells Fargo & Company is an American multinational banking and financial services possessing company which is headquartered in San Francisco, California, with "hub-quarters" throughout the country. It's the fourth largest bank or investment company in the U. S. by property and the major standard bank by market capitalization.

Its profit showing is really as follows:-

(https://www. wellsfargo. com/biz/retirement/profit-sharing-plans/)

  • For companies, size really doesn't matter to offer income sharing. Worker eligibility is defined while joining.
  • Employer: Around 25% of settlement or $52, 000 in 2014. Income sharing plans permit the company to vary every year according to the profit.
  • The contributions are deducted from the taxable income.
  • The withdrawn contribution and revenue are taxed as regular income.
  • Stocks, bonds, mutual money and Advisory Products available by way of a Wells Fargo Advisors brokerage account.
  • There will be a 10% IRS early on withdrawal penalty if the income is withdrawn before era 59Ѕ unless valid exclusion.
  • Normal retirement living age
  • Separation of service after five years and reaching age 55
  • Death
  • Disability
  • Substantial equal regular payments over life expectancy
  • Qualified armed service reservist

Required withdrawals must start at years 70Ѕ

Deadline to create and Fund

  • Must be established by the last day of the business' fiscal year
  • Contributions may consist through the business tax filing time frame (plus extensions)


Revenue showing is a small business arrangement that means it is possible for two or more parties to talk about in the gains and losses came to the realization by a business operation. The precise structure of the income sharing strategy ranges based on governmental legislation that are applied in the jurisdiction where the business is situated, and the terms and provisions within the contract that establishes the working relationship between the worried parties. This process may be used to make up employees of the company far beyond the usual salary or salary, or be used to provide settlement to affiliate companions in an web business venture. In a business setting, earnings sharing may take place within a limited relationship design. Here, the associates agree to show in the profits and losses sustained by the operation, with specific procedures on how those profits and loss are distributed each accounting period. Essentially, the general partner gets the responsibility of reporting the amount of loss or profit incurred to the limited companions, then compensating them in line with the terms within the partnership agreement.

USER Functions:

  • Managers will setup available business models and elements of them will be the revenue show model
  • Service provider will setup earnings show model associated to Applications and services, plus they have to be packed in the Revenue Settlement & Writing System
  • Developers have to know about the profits of these applications and services
  • Involved service/applications providers have to know about the earnings of these applications and services

The following amount shows a conceptual architecture of something for settling and writing revenues. There are a number of different resources of revenues for confirmed service that'll be integrated and refined in line with the business model of each service and the income sharing policies given for each spouse. The final revenues balance will be transferred to a payment broker to provide the obligations to each company/developer

Infinite Risk/Compensation Revenue-Sharing model RESEARCH STUDY:

Raising the Club in Smart Pricing

Smart Pricing has received a great deal of attention in the Information Communication Technology (ICT) industry over the last a year. IT companies are touting it as a key differentiator in an exceedingly competitive post-crisis environment, and organizations are challenging for more risk/pay back and usage-based charges so that their ICT lovers have more accountability in each proposal and these ICT engagements will be more aligned to business priorities. International Data Company (IDC) is predicting that Smart Pricing will account for near 50% of most ICT services deals by 2015. Infinite, an Indian IT services and software company, has been one of the very most aggressive services providers in this game changing market active whereby approximately 30% of its total revenue comes from risk/reward charges models. Its intellectual property-based earnings sharing model is certainly setting the pace in the industry where many ICT service providers are still battling to come up with the right method. Infinite isn't just setting the tempo in Smart Pricing models in the ICT industry, it has clearly increased the bar for the rest of the field.

Organization Review:

Infinite Computer Alternatives can be an India-headquartered global services service provider of infrastructure management services, intellectual property (IP)-leveraged solutions, and IT services. The company focuses on the telecom, mass media, technology, manufacturing, electricity, and healthcare companies. Currently, telecom is its principal vertical and this includes telecom service providers as well as networking equipment distributors. Its services portfolios course program management outsourcing, packed application services, impartial validation and verification, product development and support, and higher value-added offerings including supervised platform and product executive services.

It presently has 3, 668 employees and has a global footprint of 16 offices throughout the world including Singapore, the U. S. , the U. K. , India, Malaysia, and China. R&D sites are concentrated in Indian places like Bangalore, Chennai, Hyderabad and Gurgaon. The business is detailed on the NSE and BSE and its own FY10 income was roughly US$140 million. Infinite has a healthy mixture of customers from the set of Lot of money 100 companies including IBM, Alcatel Lucent, and Motorola across several verticals, but its talents continue being in the telecom and health care sectors.

Challenges & Alternatives :

Mature products are targets: Currently, Infinite works with organizations, examines their or their clients' product portfolios, and identifies products or solutions that are mature and have a substantial installed base. The products continue being necessary to many buyers, have a proven revenue making record, and can be better streamlined via an off shoring model to India.

The upside probable must be significant: Infinite must execute careful due diligence before actually making any large-scale investment. Among the guiding principles is the fact the product or solution must be able to deliver 20%-50% progress over the next few years with further investment funds.

Risk/reward rates models change: Infinite has made significant progress in elevating the show of its revenue that comes from risk/reward prices models. It presently stands at near to 30%, one of the best if not the best on the market. Revenue produced or splits between Infinite and customer varies from deal to offer but it is dependent on several factors. For each and every There are usually three models of revenue streams to drive growth. Additional new sales of the product, services earnings, and total annual maintenance will be the three collections of revenue channels to drive progress. The combination of the three must be able to deliver an upside that runs 25%-50% of development. The percentage of income that is related to the client will generally be lower if the revenue upside potential is less, accounting for new ventures that could renew the product.

How much to invest in the new product? : Infinite would also need to do its homework in regards to what and exactly how much investment it needs to put into the products to generate the sort of growth that it is looking for. Aware that some of these products have great fluctuations in income, which may be difficult to forecast, the company must factor this into its planning.


  • According to IDC this original engagement model and smart prices will eventually define the ICT industry over the next few years. Evidently one of the trendsetters, Infinite is establishing an excited tempo in Smart Charges that many of its rivals will have to play catch-up.
  • Infinite's unique smart costing model has achieved sustainable returns. In the current economical environment, organizations want for overall flexibility and agility; and therefore of this relationship, a lot of its existing clients are now able to realign their resources by channeling them into proper areas of progress.
  • Increase in the worthiness of offerings as R&D investment in primary products as well as additional Infinite capital ploughed in will have the entire impact of enhancing the full total solution or product portfolio.
  • The company posts 20%-50% revenue development, usually depending on a number of factors including how speculative the product or solution is. Infinite is plainly on a rise trajectory and therefore, its IP-based risk/pay back model has found a warm reception among some organizations.

Piece-rate pay:-

Piece-rate pay provides payment for every item produced and is therefore the simplest way for a company to ensure that employees are paid for the quantity of work they actually. Piece-rate pay is also sometimes referred to as a "payment by results system", "piece work" or "performance related pay". The oldest type of performance pay, part rate is when a worker is paid a set rate for each unit of development. In other words, he or she is paid by results.

For example, a stock employee may be paid per item she or he makes on the production series.

In the uk and in various other countries with minimal wage laws, pay rate must be used in unification with minimum amount wage laws for employees. For instance, an employee who works at a $0. 1 per-piece rate and completes 70 portions in an hour would not receive $7. 00 but would receive his state's minimum wage, which might be, for example, $7. 25 one hour. However if the guy can work fast enough to complete 90 pieces in an hour they can earn $9. 00 per hour. So, per-piece rate pay can become a motivation for employees.

Incentive deals such as piece rates and income sharing are designed to solve principal-agent problems when work is not observable. The benefits of the piece rate system is so it motivates employees economically to complete all the work as they can, and consequently they can increase their monetary reward by maximizing their outcome.

A potential problem with paying employees based on a piece rate is that work must be expended in quality control; otherwise, workers may attempt to produce quantity at the expense of quality. Therefore, piece-rate pay encourages effort, but, it is reasoned, often at the expense of quality.

From the employee's point of view, there can be certain problems which might affect the creation and eventually influence their pay. The problems which can possibly hamper the creation may include break down of the production equipment or delay in the delivery of the raw materials which decreases the production. These factors are beyond the employee's control - but could potentially influence their pay.

The method for these problems is the fact piece-rate pay systems tend, to have two elements
  • A basic pay aspect which is a fixed time- based mostly element
  • An output-related factor- Usually the piece-rate element is only elicited by the business enterprise exceeding a target output in a particular defined period of time
Piece-rate systems are broadly categorized into three categories

i. Right Piece-rate

ii. Piece-rate with Guaranteed time rates

iii. Differential Piece-rates

Straight Piece-rate method payment is made based on affixed amount per models produced without regard to the time taken. Thus the earnings could be calculated as follows

Earnings= Quantity of devices x rate per device.

The fixations of part rate generally depend upon
  • The equivalent time rate for the same school of workers
  • The expected productivity in given time

In Guaranteed time rates system payment is at time rates but modified to the price of living. The workplace amounts the high labor cost by increasing the price tag on the merchandise. The merit prizes for skills, personal characteristics, ability, punctuality etc. are also considered in this system.

Differential Piece-rate system is a wage plan predicated on a standard task time wherein the staff member receives increased or lowered piece rates as his creation varies from that expected for the typical time. That is also called an accelerating incentive.

Comparison of three price rate systems

Wages during Differential Part rate

Period Straight Part rate

Guaranteed Foundation wage

Straight part rate with

minimum assured wage

Standard output

Output in items produced

Time clocks and location checks :-

Few ways of encouraging workers to place forth their finest work are piecework, time clocks, and location checks.

Time clock is not at all hard and inexpensive technique to introduce into a location of business; nevertheless the defects in it is the fact that the information received from wall clock is relatively useless in determining employee's working behaviors. A period clock can only just inform a director of how long a worker spends in the workplace, however, not how enough time the employee is in fact spending working i. e. how successfully is he working. There may be a probability that the employee is merely socializing the majority of the day or just doing the irrelevant tasks and the time clock would make no perseverance between staff with such habit and the worker who works diligently throughout the workday. So, we can say that point clocks don't screen efforts created by the employee; rather, simply actions his occurrence at the work environment from beginning to the end of workday. Thus it acts as a substandard method to monitor manager-worker problems.

A better method than Time clock that not simply measures the time spent by employee at place of work, but also actions his/her performance, is spot check. In cases like this the manager gives time to time visit at place of work to keep an eye on its employees. The aim of these spot investigations and inspections is to counter irregularities committed against the city budget.

The spot assessments may concern, in particular

  • Business literature and documents such as invoices, pay slips, bank claims, lists of conditions and conditions, statements of materials used and work done, and Computer data
  • Packaging, Production and dispatching systems and methods
  • Physical checks regarding the nature and quantity of goods or completed operations
  • The collection and checking of samples
  • The progress of works and investment funds for which financing has been provided, and the how it has been used
  • Accounting and budgetary documents
  • The technological and financial implementation of subsidized projects
The advantages of location checks are as follows
  • It reduces the price of monitoring workers
  • The managers do not need to to be accessible at different places at same time
  • It also increases worker efficiency. With employees being unsure of if the supervisor will arrive or not, they put more effort at the job, as instantly getting trapped "goofing off" can lead to dismissal or a reduction in pay
As everything has its pros and cons, same is the situation with Area checking. A few of disadvantages of area checks are the following
  • Frequent spot investigations, however, are costly and reduce the firm's profitability
  • Spot bank checks work, in place, through threat
  • These can have negative effect on employees moral; he/she can't work readily at workplace as a consequence to risk of being viewed every instant.

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