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].