Given below are two statements:
Statement I: Under profit sharing, management may sometimes allot shares in place of various incentives payable in cash.
Statement II: In some business organisations, pay hike and increments may be linked to performance.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Statement I is incorrect but Statement II is correct.
Statement I: Under profit sharing, management may sometimes allot shares in place of various incentives payable in cash. — Incorrect. Allotting shares in place of cash incentives is part of co-partnership or stock option. Profit sharing gives employees a share in the profits of the organisation.
Statement II: In some business organisations, pay hike and increments may be linked to performance. — Correct. Pay and allowances are the basic money incentive. In some organisations, pay hike and increments are linked to performance.
Profit sharing gives employees part of the profits. Co-partnership gives them company shares, which creates a feeling of ownership.
NCERT (2026-27 Edition): “(i) Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance and other allowances. Salary system consists of regular increments in the pay every year and enhancement of allowances from time-to-time. In some business organisations, pay hike and increments may be linked to performance.” “(iv) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation. …” “(v) Co-partnership/ Stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. Sometimes, management may allot shares in line of various incentives payable in cash. …” |