SITUATION
Technical Products, Inc., distributes 15 percent of its profits quarterly to its eight employees. This money is invested for their benefit in a retirement plan and is fully vested after five years. An employee, therefore, has a claim to the retirement fund even if he or she leaves the company after five years of service. The employees range in age from 25 to 59 and have worked for the company from 3 to 27 years. They seem to have recognized the value of the program. However, younger employees sometimes express a preference for cash over retirement benefits.
Question 1 What are the most important reasons for structuring the profit-sharing plan as a retirement program?
Question 2 What is the likely motivational impact of this compensation system?
Question 3 How will an employee's age affect the appeal of this plan? What other factors are likely to strengthen or lessen its motivational value? Should it be changed in any way?