Help with Profit Sharing Idea's

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Oct 11, 2010 4:17 pm

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Basic Info : Small construction company. Our company offers profit sharing to our two Project Managers. They receive (split) 25% from the company profits monthly,  amount varies monthly.

There have been two questions/ requests brought up at a recent conference, and we are not sure if we are able to accommodate the Project Managers request.

1.       Request One : The Project Managers have wanted to give “Bonuses” to their Foreman’s for incentive and job well done on certain projects. They want to take it out of their % of profit sharing, however not sure how we can accomplish this or if legally possible

 The Project Managers would rather not give the Foremen “cash” from their profit check because of tax issues. What we are  wondering is if the company could cut the Foremen a “Bonus “check from the % of profit the Project Manager would receive for the month (it would be taxed as income to the Foremen). This would only be done upon Project Managers request, and individually as each Project Manager has different Foremen and run different jobs

Example:

Project Manager Months Profit share   12.5% totals..............................20,000

Foreman bonus (Managers discretion) ......................................2,000 (taxed as income to foreman)

Payout to Project Manager for profit share...............................18,000 (Taxed as income to Project Manager)

2.       Request Two: The Project Managers would like an “assistant/ field rep” to run errands, handle their paperwork, calls, ect. and would be on the road with them. We cannot offer our office people to them for assistants as they are based at the office and we only have two, we also are not willing to budget the expense for this as we feel we pay salary and profit sharing to them to complete their tasks.  The Project Managers had asked if the “assistant” could be hired under the company, but their salary come from their profit sharing (same scenario as the “bonus” pay for foreman.  We would not have a problem with this, and we would be willing to pay the unemployment insurance,  exc. for the “assistant” Is this possible and legal to do.

Example:

Project Managers Months Profit share   12.5% totals...................20,000

Foreman bonus (Managers discretion) .....................................       2,000 (taxed as income to foreman)

Assistant’s Salary (Month)............................................................      2,000(taxed as income to Assistant)

Payout to Project Manager for profit share.................................16,000 (Taxed as income to Project Manager)

We are willing to have our payroll do this for the Manager’s, I would think they could do what they want with their money, but would like to know if there is some reason legally we cannot do this. We are a small company so some areas are a little unsure to us but we cannot think of any reason this could not be done, and all money would be taxed.