Southwest Airlines Profit Sharing: A Comprehensive Overview

After Ryanair, Southwest Airlines is the largest low-cost carrier in the world. It serves 121 destinations within the U.S. and operates flights to 10 other countries. Its fleet consists of 815 aircraft and the company prides itself on its excellent hospitality and customer satisfaction.

In 2023, Southwest had an operating revenue of $26.1 billion and the company looks to reward its employees for their contributions to its success through its profit sharing plan.

But how does this work, and what are the benefits?

We'll answer these questions and many more in this comprehensive guide.

What Is Southwest Airlines' Profit Sharing Plan?

Southwest's profit sharing plan is designed to motivate and reward its employees by providing them with a share of the company's annual profits.

It gives additional compensation to employees for their dedication and contributions to the company's success. Originally, it was based on employees purchasing stock in the company but this is no longer part of the plan.

What employees have received

The company paid out around $81.4 million in profit sharing payments to its employees in 2023. This equated to 12.2% of its profits which were $667 million for the year. On average, eligible employees received $1,356.23.

This was lower than the $127 million Southwest paid out in profit sharing payments in 2022, which may be a reflection of the airline industry as a whole struggling to recover from the Covid-19 pandemic.

Benefits of Southwest's Profit Sharing Program

The benefits of profit sharing for any company include:

• Motivation: When employees know their performance has a direct impact on their earnings, they're motivated to be more efficient, productive, and engaged. It encourages employees to go above and beyond.
• Financial reward: Profit sharing payments supplement an employee's salary and improve their financial well-being.
• Sense of ownership: Sharing profits with employees gives them a stake in the sustainable growth of the company and engenders a sense of ownership, and increased employee engagement.
• Employee retention: It makes it easier for the company to retain key employees as they're more likely to feel that their work is valued.
• Customer satisfaction: If your employees are more motivated and productive, this usually translates to better customer service and satisfaction.

Want to know how profit sharing could work for your business? Check out ShareWillow’s Profit Sharing Template.

How Does Southwest's Profit Sharing Work?

Let's take a close look at how Southwest's plan works.

Calculating profit sharing amounts

To calculate the profit sharing amounts, Southwest Airlines considers an employee's annual salary and the number of hours they've worked during the relevant year.

The exact formula Southwest uses isn't available but, essentially, employees with high salaries who have worked the most hours receive the largest payments.

Distribution of profits to employees

The payments are paid in cash to employees in March each year and represent a certain percentage of their annual salary.

Usually, the first 10% of the payment is deposited into the employee's retirement savings as part of the company's qualified defined contribution plans.

Taxes and other considerations

In the U.S., profit sharing payments are subject to income taxes, and the amount is considered to be part of an employee's taxable income.

This means an employee pays their usual income tax rate on their annual compensation from profit sharing.

Who Is Eligible for Southwest's Profit Sharing?

The eligibility guidelines for becoming a profit sharing partner in Southwest Airlines are slightly more complicated than they are for other companies.

All employees are eligible but they must have worked at least 1,000 hours for the company. This is because Southwest aims to reward employees for their length of service, as well as employee contributions to the company's success.

How Southwest Employees Feel About the Profit Sharing Plan

Southwest's profit sharing plan is very popular among its employees and this is clearly evident from employee reviews on sites like Glassdoor.

Several of the reviews on this site mention the plan as one of the reasons they love working for the company.

Other Employee Benefits Southwest Offers

Some of the other benefits Southwest offers its employees include:

Health coverage

Southwest provides its employees with health coverage that includes dental, medical, vision, and prescription insurance. It also helps with mental health care through its Employee Assistance Program.

Free travel privileges

One of the biggest perks of working for the company is that employees and their dependents can travel for free on all Southwest flights.

Career development resources

Southwest provides employees with free resources to aid in their career development. This includes guidance on skills development and interview preparation.

Other Companies Offering Profit Sharing

There are many other companies with profit sharing programs, such as:

Home Depot

Home Depot is one of the largest retailers in the U.S. Known as "Success Sharing", Home Depot's profit sharing plan paid eligible employees a total of $409 million in 2022. In the four years leading up to 2022, the payments totaled almost $2 billion.

Ford

Ford Motor Company's profit sharing program has been around since 1914, meaning it has one of the oldest plans in the world. In 2023, Ford paid its eligible employees $10,400 in profit sharing payments, on average. In 2022, the amount was around $9,176.

Delta

In 2023, Delta's total profit sharing payments to its employees amounted to $1.4 billion. This meant each eligible employee received around $4,545 on average.

Get Started With Profit Sharing by Downloading This Free Template

Has this guide convinced you to start your own profit sharing plan for your employees?

Or, do you already have one but are struggling to manage it effectively?

Whichever camp you're in, ShareWillow's profit sharing management software can help you to build a transparent and effective program that benefits you and your employees.

You can create a plan from scratch and add your own milestones, calculations, and vesting schedules. Or, you can use a Profit Sharing Template to quickly get started. ShareWillow's software helps you launch a plan that rewards your employees the right way.