What type of compensation plan distributes a predetermined percentage of the firm's profits to employees?

A profit-sharing plan is designed to distribute a predetermined percentage of a company's profits to its employees, aligning their interests with the overall success of the organization. This type of compensation fosters a sense of ownership and motivates employees to contribute positively to the company's performance since they directly benefit from its profitability.

In a profit-sharing arrangement, employees receive a portion of the profits, which can be distributed in various ways, such as cash bonuses or contributions to retirement accounts. This not only enhances employee engagement but can also lead to higher productivity, as employees become more invested in achieving the company's financial goals.

On the other hand, commission-based plans are more focused on sales performance, rewarding employees based on the sales they generate; wage adjustment plans typically involve changes to salaries based on market conditions or performance rather than profit; and base salary plans concentrate on fixed salaries without a variable component linked to the company's profitability. Therefore, the correct identification of a profit-sharing plan illustrates the strategic approach to linking compensation with organizational success.