In these days when employees & employers alike just look to 'use' the other, your Employer surely is an odd-man-out......a very pleasant one @ that.
Also goes to show that when the individual's intent is fair & equitable, the Company doesn't have to be a MNC, etc.
To add to what Nathrao suggested vis-a-vis the criteria, suggest DON'T take the designation into consideration. This will negate whatever goodwill this step can generate. Every employee would have put-in his/her efforts commensurate with his/her role.
Usually any such payments by Organizations give as a % of the current CTC. That will ensure the designation issue is bypassed.
The Primary criterion would be the number of years served.
A Secondary criterion CAN be: how many promotions did he/she get during the tenure [more means higher amount--without saying so, performance is being taken into account here].
As far as naming the payment is concerned, Ex-gratia payment is one. But IF you wish to make it more personal & effective, MAYBE "Thank you Bonus" OR "Loyalty Bonus" OR some such terms. However, pl take the advice of your CA--the term you finally chose with employees' perception in mind shouldn't get into any IT bottlenecks......both for employee & Company.
There's one thing that also needs to be thought of--is this expected to be an Annual affair or a one-time affair? After discussions & decisions with Finance, HR & your boss, suggest formulate this into a clear Policy without any scope for ambiguity later on.
I have little different take. My views are radically different.
Your "boss" has exactly come up with a proposal that suits proprietor than entrepreneur. Your "boss" is more a boss than a business leader.
Rather than rewarding the length of service, let your boss reward the performance. Your company (or any company fro that matter) progresses because of people performed well. What is the guarantee that a long staying employee has performed well?
For a proprietary concern getting right manpower is a challenge. Against this backdrop, those who stay, those who remain loyal, those who show allegiance to their boss than their job etc become valued employees. While distributing profits, if you make length of service as criteria then are you sure that they are all efficient employees?
By the way, in this 21st century culture, why people stuck to proprietary concern for a long time? Did they lack career aspirations? Were they are in-confident? A confident employee would have moved long ago. Therefore, please check whether the employees are serving because they have nowhere to go. There are three types of commitments that employees show towards their organisation, affective, normative and continuance. While rewarding employees make sure than you do not reward those who have continuance commitment.
All the best!
I think there's some mixup of issues from your end while dealing with this topic....which is a bit rare for you.
W.r.t. your line "Rather than rewarding the length of service, let your boss reward the performance", there are Annual performance Reviews & salary hikes to take care of the typical performance issues. This is supposed to be exclusively focusing on those with a long tenure.
And, without generalizing it, the chances of Performance reviews being more focused only on performance rather than politics or other issues clouding the reviews are much LOWER in Proprietary Concerns......relatively speaking.....for the simple reason that here the number of layers between the employee & the Top guy [& consequently the chances of other issues coming into the decision making process] are relatively lower than larger Companies.
This was the reason for my suggestion about including Performance-related criterion as a 'CAN be' AND indirectly...else the employee focus is likely to move from the Profit-share reward to other issues. Why give a scope for such situations at all?
Vis-a-vis your lines "While distributing profits, if you make length of service as criteria then are you sure that they are all efficient employees?.........................moved long ago", I think that's an over-assumption to make of THIS Concern/Company.
Further, that's ALSO an assumption no one can make for even MNCs OR super-large Corporations. I know of many persons--at different levels--who work in Top-notch Companies, including Mega-Corporations [both IT & Non-IT] who fall into this category. They haven't moved for different reasons.....surely NOT because they weren't efficient or confident.
And herein lies the catch.....or rather TWO catches.
First one, the standard line in HR is : "A person leaves the Manager, not the Company". So NOT all people move from smaller Companies/Concerns to bigger ones just because they are confident or efficient.
The very fact that this Concern/Company where Mrs. Gauri M. Khan is working, is even thinking of rewarding those with longstanding innings here proves that-- (1) the Company has cash & is doing well (2) at least a majority of those who are working here are performers....else there wouldn't be profits to share AND (3) the Boss seems reasonably well considered by the employees.....else there wouldn't be many employees who would be long-timers.
The Second Catch is: employees who CURRENTLY exhibit 'continuance commitment' MAY NOT necessarily have been so from the beginning.......in fact they wouldn't have been. The reasons why smart/efficient people slowly change to an attitude of continuance commitment DON'T just depend on them alone. The Organization too contributes quite a bit for such a transformation of the employee.....in different ways.
A classic example of this scenario, to those following the Company for the past decade or so, would be Infosys.
For a Company that was the Bellwether of the Indian IT industry for over a decade, if not more, everyone had to see the situation of the Company slipping in almost all benchmarks & NRN having to make a brief comeback & eventually Vishal Sikka taking over. The team.....not just the Core Team.....was much the same earlier when the Company was doing great & when things began to slip quite badly.
Whether ones likes it or not, 'continuance commitment' creeps-in over a period of time in any & every Organization......big or small AND all over the Globe.
I recollect your postings reg PMS in many threads & I think that's where regular review/revamp of PMS.....which too I think you had mentioned in a few threads.....becomes important.
Ideally employees with 'continuance commitment' shouldn't be allowed to exist at all......but in reality ignoring [the Best-Case-Scenario] or firing [the Worst-Case-Scenario] such employees becomes too tough from the HR angle....@ the individual HR Person's level.
At the EoD, it's quite easy to say things like 'ignore/fire them' from the sidelines, but as you know it's extremely tough for those handling such situations @ the spot.
And that's where the HR person's role becomes so very important--handling such situations with the needed finesse & Win-win strategy under stressful/tricky conditions.