FORMS OF PROFIT SHARING

 

FORMS OF PROFIT SHARING


VARIOUS FORMS OF PROFIT SHARING


 An enterprise may adopt any of the following basis for sharing profits:


(1) Industry Basis: 

Under this form of Profit Sharing, the profits of all the units belonging to a particular industry are added together and then this total profit is divided between the employers and employees in a certain ratio. An important feature of this form of profit sharing is that the workers of the units suffering losses may also get a share in the profits of the industry.


(2) Locality Basis:

Under this form of Profit Sharing, the profits of all the industrial units situated in a particular locality are added and then this total profit is divided among the employers and employees of the locality in a certain ratio. An important feature of this form of profit sharing is that the employees of the units suffering losses may also get a share in the profits of other units of the locality.


(3) Unit Basis:

Under this form of Profit Sharing, the profit of an individual unit is divided among the workers of the unit only. Under this form, every unit divides a certain part of its profit among its workers. Thus, the workers of the units in which there is a loss, cannot get any share in profits.


(4) Departmental Basis:

This form of Profit Sharing is further classified on a unit basis. Under this form, the profit-sharing scheme is applied at the departmental level. The profit earned by a particular department is shared by the employees of the same department in a certain ratio.


(5) Individual Basis:

Under this form of Profit Sharing, every worker gets a share in the profit of the concern on the basis of his efficiency and productivity. This method establishes a direct relationship between the efforts of the worker and his remuneration.


(6) Industry and Locality Basis:

This is not a new form of profit sharing. It is a combination of locality basis and industry basis. Under this form, the profits earned by all the units situated in a particular locality and belonging to a particular industry are added and then this total profit is divided among the employers and employees of these units in a certain ratio.



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