What is the normal rate forprofit sharing?

Question

I suppose this varies. But I am starting a new restaurant and want to give the executive chef profit sharing. The restaurant is small (15-20 tables). What should I expect to share with him? 5%, 10%, 20%, 50%? I am clueless. I want him to be motivated to take care of it like it is his but I don't want to have to give away everything. Also is the profit sharing above and beyond his salary or is that included?

Answer 1

There is no "normal" answer here.

What you determine first is a total amount of compensation that you can afford/are willing to pay. Having done this, you can allocate % to salary, FICA, health insurance, unemployment, profit sharing and so forth. If you are not providing Insurance then that % is zero.

If you determine to pay a percentage in profit sharing, you can pay it in cash, or you can make a contribution into a retirement plan. Both are tax deductible - but retirement profit sharing can be vested, while cash profit sharing cannot.

If vested, the person must stay with you for a maximum period of between 3 and 7 years before all the money is "vested" (considered fully theirs). This is especially beneficial in a busines that has high turnover like restaurants.

Good Luck.