Defining the terms of financial participation

Profit sharing: Profit sharing involves employees receiving a proportion of their income from profits made by their employers.

Share-based profit sharing involves allocating shares to employees on the basis of profits.

Employee share ownership: This refers to arrangements that provide for the broadly based ownership of shares by employees in their own firm. This may involve employee share-ownership plans (ESOPs), where shares are held for employees in a trust, or it may consist of reserving a proportion of company shares for employees, which are offered at privileged terms and limited to a worker's period of employment.

Gainsharing: Gainsharing is a group incentive scheme in which employees receive a bonus related to the performance of the group. This may be based on cost savings or productivity improvements within a production line or sales team, for example.

Formal gainsharing plans have been used in the US since the 1930s. Research is under way into the potential of some form of gainsharing in the public sector.