and labour the results of profitable trading? There are many schemes that have been tried, but two methods of profit-sharing and one of share-purchase are explained here, which time has proved are successful. They are a framework which can be altered and varied to suit the peculiarities of any business.

It is desirable to give a few definitions before explaining the details of the schemes. The basis of practically all profit-sharing schemes is that there should be a 'minimum dividend upon capital' before any division of profits with labour takes place. Labour receives its wages, and the minimum dividend may be called the 'wages' of capital, which must be paid before any distribution of profits can be made. What would be a fair dividend upon capital depends upon the nature of the business and the risks that are incurred. The minimum dividend may be fixed at 6 per cent., 7 per cent., 8 per cent., or any other figure, but on the average profits of the past few years it should allow a margin of profits for distribution, so that the scheme would start with the probability of a share for labour at the end of the year. The 'capital' should be the ordinary share capital in a company, as the interest on debentures and dividend on preference shares, if any, must be paid before any profits can be shared. In a private firm, the capital would be the assets actually employed in the business. The 'profits' are the net profits made in the current year, as shown in the audited accounts, after paying all the expenses of carrying on the business, and the 'surplus profits' are the balance of the profits after the minimum dividend on capital has been provided for. Annual earnings' are the total remuneration, including overtime, paid to the employees entitled to share in the profits.

One method, and a simple one, is as follows. For every 1 per cent. above the minimum dividend that is paid on the ordinary share capital, 1 per cent., or some proportionate rate, is paid on the annual earnings of every employee who is entitled to share in the profits. The employees entitled to share may be limited to those who have been engaged the whole of the year in which the profits have been made, or a shorter term, such as three or six months, could be fixed. All employees,

including managers, overseers, etc., should be included, as each can improve the efficiency and help to increase the profits, and their total earnings are a measure of their capacity to improve the profits. The employees can calculate the 'dividend' on their earnings when they know the dividend on the ordinary capital, and their share rises and falls with the dividend paid to the shareholders.

In some businesses the policy of the directors or proprietors is not to distribute the profits that have been made each year, but to build up sufficient reserves to maintain a fairly even dividend in good and bad years. A uniform dividend may be satisfactory to a shareholder who retains his shares for many years. An employee, however, who had worked well in a year of large profits might feel aggrieved if he received no more then than in a year of small profits. The knowledge that the reserved profits would be used to increase the dividend in future years when the profits were small would not satisfy him, as he might lose his job at any time. This objection can be overcome if, after the minimum dividend has been paid, a proportion of the surplus profits-i.e. onehalf, one-quarter, or any other fraction previously fixedis divided amongst the employees in proportion to their annual earnings. The balance of the surplus profits, after the payments to the employees have been made, belongs to capital and may be carried forward, paid out as dividends, placed to reserve, or distributed in the form of bonus shares.

These two suggestions can be modified in various ways, but whatever scheme may be adopted, it is essential that there should be no misunderstanding or suspicion that a 'square deal' is not intended. The details of the scheme should be printed and circulated to the employees, so that they may know exactly the method on which the profits will be distributed, and the audited profit and loss account must be the basis from which the share of the employees is calculated. The annual distribution to the employees might be an opportunity for the principals to address them at a meeting, and explain the reasons for the rise and fall in profits, the probable developments in the future, and thus arouse their interest in the organisation in which they work.

One drawback of modern large-scale production is that employers have few opportunities of meeting their workers, but an annual gathering of this kind-even if there were no profits to distribute-would enable a sympathetic employer to explain to his employees some of the reasons for the fluctuations in the profits, and the particular difficulties which had to be overcome.

It has been suggested above that the whole of the employees' share of the profits should be paid out in cash, but if there should be a works savings bank, each worker's share should be paid into his account, to be drawn out when he desired. If a restriction were placed upon the worker's right to use his share of the profits as he thought best, he might resent the interference with his liberty of action, and lose interest in the scheme.

There are other ways in which the workers' share of the profits might be used for their advantage. Some fixed portion of their share might be allocated to a fund controlled by trustees, to provide pensions for employees who are past work, and who have been continuously employed for a certain number of years. It is a difficult problem for a sympathetic employer to deal with his aged employees who are past work, and if in years of prosperity a strong pension fund were accumulated, the workers could look forward with less dread to their old age, knowing that the Government's Old Age Pension would be augmented by an additional pension from the firm's fund. If the pension fund be controlled by a trust deed, and the powers of the trustees clearly defined, so that the fund can only be used for providing pensions, it is possible, subject to the approval of the income-tax authorities, to obtain a refund of income tax on sums given to the fund, and on the income from investments, and thus provide more pensions. It would be well, however, that part of the workers' share of the profits should be used to benefit the existing employees. A bird in the hand is worth two in the bush,' and many of the younger employees might think they would leave the firm before they reached pensionable age, and would, therefore, have no interest in the scheme.

Any proposals for profit-sharing must be in addition to, and not in lieu of, fair wages. A working man is

used to receiving his wages weekly, and arranges his standard of living accordingly, and it would be unreasonable to expect him to accept less than a fair wagerate, in the hope that at the end of the year he might receive a part of the profits. The share of the profits, when they exist, should be in addition to the normal wages, and should be looked on by the employees as a bonus which may or may not be repeated in future years. Profit-sharing schemes such as these are suitable for large or small businesses, and even for those in which the current profits are only sufficient to provide a small margin above the minimum dividend on capital. When the workers realise that any increase in the profits will add to their income, the stimulus for greater efficiency will be provided, and the capitalists and the workers both benefit by any improvements.

It is impossible to foresee all the changes and developments that may occur, and it is desirable that there should be a clause in the scheme by which it can be terminated or modified if the proprietors—whether an individual or the shareholders-should wish to do so. The scheme might be ended by giving six or twelve months' notice to the employees, but the notice should not terminate in the current financial year, as they might consider that the profit-sharing had been altered or abandoned because the profits were likely to be good and the workers would receive a large share.

Another method of sharing profits, which has been adopted by some companies, is to capitalise the employees' share of the profits and to issue some special form of share certificate, with restricted rights of sale or transfer, and future dividends on these shares are paid to the employees. There are two drawbacks to this method. A worker may think, with some justification, that the shareholders receive their profits in cash, and that he should be treated in the same way, as he might prefer to use his share for educating his children, buying furniture, or for some other purpose. It is also possible that the company may not always require additional share capital, and the compulsory increase to dividendearning stock would be undesirable.

If an opportunity be given to the employees to purchase shares on favourable terms when additional

capital is needed, these difficulties are overcome, and the following scheme has been in existence for twenty-five years, and has led to very satisfactory results. This method is only suitable for a company in which the ordinary shares normally stand at a premium, and the dividends do not fluctuate violently. A special class of employees' ordinary shares should be created, which can be offered for subscription only to the employees at par. If the shares stand at a good premium, the employees will realise that a very favourable offer has been made to them, and those who have saved money, or are willing to do so, will be glad to purchase some shares. The employees' shares could carry the same rights for dividends and voting as the ordinary shares, but as they are issued below their market value, there should be a restricted right of sale. When a holder of employees' shares wishes to sell he may do so, and when he leaves the employment of the company he must sell, by notifying the directors, who will find another employee willing to purchase them at par-the price the holder paid for them. If the dividends have decreased, the directors may not be able to find an employee willing to purchase the shares at par, and the holder will then be allowed to sell them to any one at any price. The purchaser, and every subsequent holder, must always offer the shares, when he wishes to sell, to the directors, and if they can find an employee willing to buy them at par, the holder must sell them, and the employees' shares thus return to the workers, the persons for whom the shares were originally created. It is necessary to restrict the right of sale in this way, as an employee might be tempted to sell the shares he bought at par, at a premium, to some one not connected with the business, and the object of the employees' shares would be frustrated. The restrictions on the right of transfer can be endorsed on the certificate, and thus prevent any misconception.

Working men and women do not understand the usual methods of buying shares and dealing with stockbrokers, but they are accustomed to regular weekly deductions from their wages. The shares when originally issued could be purchased for cash, or subscribed for by weekly deductions from the wages, of threepence or sixpence per share. Employees paying cash would have