A contract should define the impact of the changes. It is important that the Agency communicates the change before the start of the profit-sharing year. The provisions allowing a company to amend the agreement in the middle of the year do not give the Agency a fair opportunity to plan for the amendment. Gainsharing is a program that returns cost savings to employees, usually as a lump sum bonus. It is a measure of productivity as opposed to interest, which is a measure of profitability. There are three main types of interest: suppose a company with only two employees uses a comp-to-comp method for interest. In this case, staff A earns 50,000 USD per year and staff B 100,000 USD per year. If a business owner shares 10% of the annual profit and the business earns $100,000 in a fiscal year, the company would allocate the share of profits as follows: a company is not obligated to contribute to an incentive plan if it does not make a profit, but it does not necessarily need to be profitable to make an incentive plan available to employees. Most contracts provide that the incentive contract is terminated either with the termination of the agency contract or by written notification. Some give advance notice to the Agency, although no one gives the 180-day communication that we recommend. Only five of the agreements reviewed contained an arbitration clause. These agreements were concluded with Atlantic, Commercial Union (personal lines), Great American, Home and Zurich-American. The same number of companies in our study use three- or one-year calculations.

One-year contracts may have benefits for some agencies. Many companies today use growth and retention factors in addition to profitability and volume to determine the Agency`s bonus. Some companies reward the agent separately for growth and/or retention, while others effectively penalize the otherwise profitable agency that does not grow and/or maintains its business at a certain level. As noted above, for some contracts, a profitable agency would not benefit from profit sharing if growth/deduction targets were not met. Employees may receive their share of profits in the form of cash or corporate shares.