Limitations of Profit-sharing


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Limitations of Profit-sharing:

 

Uncertainty:

There is high degree of uncertainty in the profit-sharing scheme/plan. Profit-sharing is uncertain because it will be paid only when the profit exceeds a particular limit. The profit may not cross a particular limit-due to market forces and the workers will suffer. Thus, profit-sharing does not give full guarantee of extra payment to workers. It acts like a fair weather plan.

 

Unfair to efficient workers:

Profit-sharing is a group incentive plan. It gives equal benefit to all .workers. Distinction is not made between good and bad workers. As a result, sincere and efficient workers get less than what they deserve, while insincere and inefficient workers get more than what they deserve.

 

Opposition from trade unions:

Trade unions and workers feel that bonus payment is better than profit-sharing. They generally oppose profit-sharing and demand bonus from the employer as it is a cheap alternative to profit-sharing.

 

Adverse effects on labour-management relations:

Sometimes, relations between labour and management are adversely affected on the point of profit-sharing agreement. This defeats the very purpose of profit-sharing. Disputes are possible as regards the profit-sharing agreement itself.

 

Not useful during depression:

Profit-sharing as a method of extra remuneration to workers can be used during the period of prosperity when profits are high. It cannot be used during the years of depression. Even newly established companies are not in a position to introduce profit-sharing scheme for their employees.

 

Opposition from conservative employers:

The concept of profit-sharing is not fully acceptable to conservative employers. They feel that profit is the reward for the risks and uncertainties. They also argue that workers must be prepared to share profit as well as loss in the business.

 


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