WHAT IS MEANT BY PKOFIT-SHAKING.
7
Tlie resolution referred to was in the following terms : —
“The International Congress is of opinion that the agreement,
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 profitsharing
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 payment
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 participation
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].
