WHAT IS MEANT BY PKOFIT-SHAKING. 
7 
Tlie resolution referred to was in the following terms : — 
“The International Congress is of opinion that the agree 
ment, freely entered into, by which the employee receives a 
share, fixed in advance, of the profits, is in harmony with 
equity and with the essential principles underlying all 
legislation.”* 
The report of the special Committee went on to elucidate the 
above definition, as follows: — 
“ With respect to the ‘ agreement ’ mentioned in the definition, the 
Committee consider that, while an agreement binding in law is the normal 
form, they do not exclude cases in which the agreement has only a moral 
obligation, provided that this agreement is, in fact, honourably carried out. 
“ By a ‘ share ’ in profits is meant a sum paid to an employee, in 
addition to his wages, out of the profits, the amount of which is dependent 
on the amount of these profits. If an employer undertakes, for example, 
to contribute to a Pension Fund £1 for every £2 contributed by his 
workmen, this is not a case of Profit-sharing, unless the undertaking is 
to pay out of profits only, because the sum payable under the agreement 
does not depend upon the amount of the year’s profits. 
“ With respect to the ‘ profits ’ a share in which is, under a profit- 
sharing scheme, allotted to the employees, these profits are, in the opinion 
of the Committee, to be understood as the actual net balance of gain 
realised by the financial operations of the undertaking in relation to which 
the scheme exists. It is, therefore, necessary to point out that the pay 
ment of bonus on output, premiums proportionate to savings effected in 
production, commission on sales, and other systems under which the 
amount of the bonus depends upon the quality or amount of the output 
or volume of business,! irrespective of the rate of profit earned, does not 
constitute Profit-sharing. 
“ It is to be observed that the money to be received by the employee 
under Profit-sharing is to be received by him strictly as an employee, i.e., 
in consideration of the work done by him. The fact that an employee 
holds shares or any pecuniary interest in an undertaking, and as such 
holder receives, on account of such shares or interest, a part of its profits, 
does not constitute a case of Profit-sharing.” 
With regard to tlie paragraph just cited, it may be useful to 
point out that while the definition there given excludes from the 
term “ Profit-sharing ” cases in which the share in profits received 
by an employee is received by him as the holder of a pecuniary 
interest in an undertaking, this exclusion presumably covers 
those cases only in which the whole of the employee’s participa 
tion in the profits takes the form of a dividend received by him 
in respect of his capital invested in the undertaking in the 
ordinary way. If a working-man has bought in the open market 
a share in a company by which he is employed, he gets a part 
of the profits; but he cannot be said to be employed under the 
method of Profit-sharing, for the dividend which he receives is 
paid to him as the owner of capital invested in the undertaking, 
and is not received by him as an employee, in remuneration of 
* A resolution identical with that set forth in the text so far ns regards the definition 
of Profit-sharing was passed at the subsequent International Congress on Profit-sharing 
held at Paris in 1900. 
t With respect to systems of Bonus on Production (irrespective of the rate of profit 
earned), information will be found in the Report on “ Gain-sharing," published by the 
Department in 1895 [C.—7848].