A Profit Sharing Agreement is a contractual agreement between an employer and employees in which the employer agrees to share part of their profits with the employees. This type of agreement is often used in order to incentivize employees, encouraging them to work harder and more efficiently in order to generate greater profits for the company. In addition, it can be used as a way to reward loyalty, as those that have been with the company for an extended period of time may receive higher payouts. Ultimately, Profit Sharing Agreements are designed to create a mutually beneficial relationship between the employer and their employees.