Southwest is giving its employees 6 weeks of extra pay

(CNN) — Southwest Airlines had a particularly rough 2019, but it still managed to turn a profit. As part of an annual tradition, Southwest is sharing that profit with employees.

The airline announced Thursday it’s giving 60,000 employees a $667 million profit-sharing bonus. That means some eligible employees will soon receive 12.2% of their annual salary, which is the equivalent of roughly an additional six weeks of pay. Other employees will get the contribution added to their retirement accounts.

“Our employees delivered outstanding results despite a challenging year, and it’s a pleasure to reward our people for all they contribute to our continued success,” said Southwest Airlines CEO Gary Kelly in a statement.

Southwest’s profit fell 6.7% last year, hampered by the grounding of the Boeing 737 Max and several federal investigations. But it’s not taking that out on its employees.

Roughly $125 million of the bonus comes from compensation Boeing gave the airline. The two companies reached a confidential agreement in December for the grounding. Southwest has 34 Max planes in its fleet, the most of any airline in the world.

Southwest’s profit-sharing plan has been in place for 46 years. It was the first airline to enact this kind of bonus, and it has given nearly $6 billion to its employees.

But this year’s bonus was smaller than that of one of its rivals: Delta Air Lines recently paid its 90,000 employees a record $1.6 billion in profit-sharing bonuses, amounting to an additional two months’ pay. It was the sixth year in a row that the company has paid out more than $1 billion to workers, Delta said.

Size doesn’t matter in this case. Employee payouts are good for business, according to Joseph Blasi, director of the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University.

“Research shows that cash profit-sharing plans, combined with a supportive corporate culture that encourages employees to offer suggestions and participate in solving company problems, can reduce turnover and improve corporate performance and personal motivation.”

Direct cash payments are not the only way companies can share profits with workers. Some make profit-sharing contributions to workers’ retirement accounts or pay them in stock.

Profit sharing is one way to demonstrate what members of the Business Roundtable have said is a corporation’s purpose: to serve all stakeholders, including employees.

Delta and Southwest are hardly the only companies to offer a cash-based profit-sharing plan. But such plans are most common in the airline and auto industries, Blasi said.

Since 2015, GM, Ford and Fiat Chrysler, for example, paid out nearly $5 billion combined to their workers, which is the equivalent of six months’ extra pay per employee, according to Automotive News.

Such high payouts are not the norm, however: 38% of adult US workers said they receive cash profit-sharing, but the median amount reported was just $2,000, or 5% of pay, according to a 2018 survey conducted by NORC at the University of Chicago.

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