The document summarizes the profit sharing system of San Jose Kitchen Cabinets Manufacturing, which allocates 50% of annual profits to employees. It outlines the company profile, mission, strategy, and principles of allocating profits based on responsibility and performance. An example income statement shows how conventional accounting is adjusted to incorporate the 50% profit share for employees. The system aims to benefit both the company and employees over the long term through increased employee engagement and motivation. Results over 24 years of implementation show sustained long-term viability and average 34% return on equity.

1. THE PROFIT SHARING SYSTEM
of
San Jose Kitchen Cabinets Manufacturing
Happy at Works conference – September 28, 2011

2. COMPANY PROFILE
OF
Kitchen Cabinets
SINCE 1982

3. Established: 1982
Factory : People’s Technology
Complex, Carmona,
Website :
www.sanjosekitchencabinets.com.ph

4. Products : Kitchen Cabinet
Wire Basket Organizer
Dish Organizer Cabinet
Counter Tops
Kitchen Islands
Average : 50
No. of
Employees

5. Branches :SM-Megamall
SM-North EDSA
SM-Southmall (Las Piñas)
SM-Dasmariñas (Cavite)

6. MISSION
TO CONTRIBUTE IN THE STUDY
AND PROMOTION OF SOCIAL
JUSTICE.
(In particular profit sharing)

7. STRATEGY FOR SUSTAINABILITY
To develop a profit sharing system
that is both advantageous to the
owners of business and the
employees. A system that results
in better net profit to the
company and a much larger total
compensation for the
employees. A win win formula. In
the end society benefits.

8. Period : 1982 to
of the present
Study

9. 50% PROFIT SHARING WITH
EMPLOYEES BENEFITS
ALREADY INCLUDED

10. PRINCIPLES
1. In any economic activity, there
are always two partners that
are necessary: employees and
capital. One cannot exist
without the other, thus both
deserve a share on the fruits
of there’s partnership.

11. 2. Before sharing the profit, we
must satisfy the basic need
of each partner. Employees need
to receive a regular income
to maintain their physical and
mental health. On the other
hand, capital needs to
receive additional funds to
correct its value due to inflation.

12. 3. In any business organization,
weight of responsibility differs
on each category of position.
Supervisor has more
responsibility than his
subordinates. Auditor has
more responsibility than a clerk.

13. Also, since there are many
factors that affect individual
performance such as talents,
motivation, skills, attitude, age and
physical condition, each individual
differs in performance from each
other.
Thus compensation to
employees should also be based on
Weight of responsibility and
performance

14. BASIS FOR PROFIT SHARING
DISTRIBUTION
1. Weight of responsibility
(Job Levels)
2. Performance

15. COVERAGE
All regular employees from the
lowest up to the highest level

16. EXAMPLE OF INCOME
STATEMENT USING THE
ACCOUNTING SYSTEM WITH
50% PROFIT SHARE

17. STEP 1. INCOME STATEMENT USING
CONVENTIONAL ACCOUNTING SYSTEM
(in thousands of pesos)
Sales 64,918 100%
Cost of Sales 38,950 60%
Gross Profit 25,968
Less Operating Expenses:
A. Salaries & Wages 9,100
Rental Expenses 2,952
Others 8,212 20,264 31%
B. Employees Benefits:
SSS employer share,
Retirement Funds Contribution,
SL/VL conversion,
Christmas party, etc. 2,036 3%
Net Income 3,668 6%

18. STEP 2. INCOME STATEMENT
USING 50% PROFIT SHARE ACCOUNTING SYSTEM
(in thousands of pesos)
NET PROFIT BEFORE TAX 3,668
ADDBACK : Employees Benefits 2,036
NET INCOME 5,704
LESS: INFLATION ALLOWANCE
(Equity x Inflation Rate/Tax Provision)
(P14,953 X (2.8% / .067) 625
NET INCOME FOR PROFIT SHARING 5,079
EMPLOYER SHARE (50%) 2,540
EMPLOYEE’S SHARE (50%) 2,540

19. STEP 3. COMPUTATION OF EMPLOYEES PROFIT SHARE
(in thousands of pesos)
EMPLOYEE’S PROFIT SHARE 2,540
LESS: Employees Benefits
(as advanced by the company) 2,036
NET CASH FOR DISTRIBUTION 504

20. STEP 4. NET INCOME FOR THE COMPANY
(in thousands of pesos)
COMPANY’S PROFIT SHARE 2,540
ADD: INFLATION ALLOWANCE 625
NET INCOME 3,165

21. ADVANTAGES
1. Compared to a company with no profit sharing,
all other things being the same, in the long term
(at least ten years), the company’s total
profitability will be better. The following are my
bases.
a) A period of more than 20-yr. test (1987–present).
b) Employees engagement study – defined as the
measure of emotional connection that an
employee feels for his organization that influences
the employee to exert greater discretionary effort
to his work. Worldwide average is 12%. Only one
in seven employees worldwide is fully engaged
and willing to go the extra mile for his company.
(www.management-issue.com)
c) Proverbs 11:24-25. Some people spend their
money freely and still grow richer. Others are
cautious, and yet grow poorer.
Be generous, and you will be prosperous.
Help others, and you will be help.

22. 2. It is less difficult to manage the
employees
3. It can do away with some of
the stressful part of a CBA

23. 4. Profit sharing is contributory to
social justice and therefore to
long term peace
5. Evangelization of the
employees will be more
effective (For Christian
businessmen)

24. RESULTS
1. The principles holds for the last
24 years. In the words of a
friend, Vic Villegas: “The
sustained long-term viability of
the business appear to be a
valid empirical evidence.”

25. 2. Average Return on Equity from
1987 to 2010 is 34% after tax
3. Cash distributed to employees
from 1987 to 2010 is about 24M

26. CONCLUSION
• The devil is afraid of social justice.
• Let us not forget that we still
belong to the early Christians.
C.S. Lewis