Define profit sharing scheme. Give its features.
Define profit sharing scheme. Give its features.
Or
What is profit-sharing? Explain its objectives.
Or
What is Profit Sharing?
Ans.
Meaning and Definitions of Profit Sharing
Profit sharing is a method of remuneration under which an employer undertakes to pay his employees a share in the net profits of an enterprise, in addition to regular wages. When shareholders share profits for contributing towards capital then workers should also get a part of profits for contributing their labour. Under this scheme the employers agree to pay a certain part of the profits of their concern to their employees over and above the wages and salaries. The term ‘profit sharing has been defined by various eminent scholars as under:
According to International Conference, 1899 Paris, “Profit Sharing is an agreement freely entered into by which the employees receive a share, fixed in advance, of the profits.”
According to H. R. Seager, “Profit sharing is an arrangement entered into by which the employee receives a share, fixed in advance, of profits.”
According to Kimball and Kimball, “Profit sharing is a scheme where by, a certain percentage of the profits is distributed at fixed interval is usually annually or semi-annually in some definite ratio to all employees who have been the employees of the firm for a stated term.”
According to I. L. O. General Report, 1948, “Profits sharing is a method of industrial remuneration under which an employer undertakes to pay his employees a share in the net profits of the enterprise, in addition to their regular wages.”
According to I. C. C. Report, 1897, “Profit sharing is an agreement freely entered into by which the employees receive a share, fixed in advance, of the profits.”
Characteristics of Profit Sharing: These are as under:
1. The share of profit is determined in advance.
2. This scheme is extended to all the employees.
3. The profit is paid in addition to regular salaries and wages.
4. Only the profits are shared, not the losses.
5. To recognize the right of workers for sharing the prosperity of the company.
6. To maintain cordial relations between employees and employers.
7. To make workers feel as members of the enterprise rather than only employees.
The following are the objectives of this scheme:
1. To recognise the right of workers for sharing the prosperity of the company.
2. To maintain cordial relations between employees and employers.
3. To make workers feel as members of the enterprise rather than only employees.
