Profit Sharing in Labor Contracts
Profit sharing in labor contracts is not a new concept in the American corporate world. It was first used about a century ago, and many profit-sharing arrangements are still in use in today's economic environment. Yet, profit sharing has not been a common topic of discussion in many collective bargaining efforts over the years. Indeed, such arrangements have been willingly offered by employers, who can enable them to stay in operation or withdraw them at their discretion. Many concerns arise when discussing profit-sharing agreements with employees. One, how much profit is the employees' rightful share? Second, how much of the workers' pay should be based on profit fluctuations? How fare is unions allowed to go in appropriating prerogatives that belonged to the management. Lastly, what would be the effect of including profit sharing in union contracts on the economy as a whole? (Weitzman & Kruse, 2009).
Positive and Negative Outcomes of Profit Sharing
Studies on the issues have shown that profit sharing can lead to both positive and negative outcomes. Managers fear that such inclusion may lead to some workers benefiting from other workers' effort. In addition to this, profit sharing may lead to salaries being variable hence increase compensation risk among the employees (Fang, 2016). However, despite these worries, profit sharing has been known for their positive outcomes especially in regards to motivating the employees. Any manager understands that a highly motivated workforce results in increased productivity and consequently increased profits for the organization. Also, such inclusion may save the company some money. Profit sharing reduces shrinking behavior among employees. As such, the organization does not need to spend much money on supervision (Weitzman & Kruse, 2009). Lastly, profit sharing allows the management to adjust wages depending on the conditions in the business environment. Instead of laying off workers, wage adjustment during downturns would enhance employment stability. Furthermore, profit sharing would only make a contract more agreeable to the union seniority, and as a manager, I would include it in my proposal.
References
Fang, T. (2016). Profit sharing: Consequences for workers. IZA World of Labor, 2016(225), 1-10.
Weitzman, M. L., & Kruse, D. L., (2009). Profit sharing and productivity. Retrieved from https://scholar.harvard.edu/weitzman/files/profitsharingproductivity.pdf
