In the new national agreement, the Programme for Prosperity and Fairness (PPF), the social partners express their interest in encouraging the more widespread adoption of profit sharing, employee share ownership and gain-sharing.

This development is part of a broader change in the relationship between management and workers. The idea that employees would be converts to the cause of their company's success and in a position to cash in on that success is redefining the whole basis of industrial relations.

Just how far the "them-and-us" culture will be broken down under the banner of partnership and profit sharing remains to be seen.

Mr Noel Cahill, economist with the National Economic and Social Council (NESC), and author of a recent report on profit sharing, employee share ownership and gain-sharing, explains that these methods of employee financial participation arose in response to strong growth in the economy as a whole. "The general idea behind such schemes is for the employees to share some of the risks and benefits with the employers", he said.

"Previous efforts to promote profit sharing and related schemes in the State during the 1980s were not very successful, but the current buoyancy of profits provides a favourable environment for the more widespread adoption of financial participation." According to Mr Cahill, 10 per cent of Irish workplaces operate some form of financial participation, compared with an EU average of 28 per cent, but we are about to see huge growth in the practice.

An important issue identified in Mr Cahill's report is whether the variable component of earnings represents additional income or substitutes for basic wages. The NESC report indicates that profit sharing and employee share ownership can have a stabilising effect in that companies don't have to shed workers when there is a downturn in fortunes. "If some of an employee's pay is at risk, one would expect that there is an offsetting lower risk of losing one's job", Mr Cahill said.

Research on job security is inconclusive but there are clearer findings in relation to increased productivity. "A wide range of studies has found that profit-sharing increases productivity, with typical estimates of 4 to 5 per cent" Mr Cahill said. However, it hasn't been firmly established why that occurs and there are various factors which come into play.

Some of the research suggests that profit sharing works better when there is broader employee involvement in decision making processes and a company culture of inclusion. Mr Eugene Kearney, industrial engineer with SIPTU college, has worked extensively for several years on developing participation initiatives at work. He sees financial participation as a logical extension of increased levels of employee participation.

"We are very supportive of profit sharing and gain-sharing and we're looking at developing models that are appropriate to particular enterprises," Mr Kearney said. He argues that such schemes are a very useful mechanism, firstly because they allow employees to have a much greater understanding of how the enterprise works and secondly because they enhance earning levels in a cost-effective way. Mr Kearney believes it is a good system that allows people to share in the success of an enterprise but points out that not all sectors are moving forward at the same level and rate.

SIPTU adopts a twin-track approach to take account of this. Profit-sharing models are recommended in some cases, whereas gain-sharing is very useful where there is room for improvement in the functioning of the enterprise.

Financial participation schemes represent a major departure from the productivity bargaining of old, which was based on compensating workers for introducing efficiencies. That's the view expressed by Mr John Geary, lecturer in industrial relations in the Michael Smurfit Graduate School of Business. "Profit sharing and gain-sharing provide a disincentive to an adversarial culture by tying the interests of the employer and the employee together," Mr Geary said.

"Where traditionally there has been a real incentive to withdraw co-operation, the financial participation system makes that route much more unlikely." Employers and trade unions are animated by profit sharing for a variety of reasons, according to Mr Geary. It helps companies justify wage increases above the norm and it's a way of rewarding workers after the work is done. In traditional pay bargaining, the reward is received in advance for any change in practices.

But the change in roles goes far beyond the restructuring of give and take. "When you move towards gain-sharing as opposed to profit sharing, it does involve the employee a lot more in deciding how gains might be defined or rewarded," Mr Geary said. By and large, profit sharing doesn't discriminate between individual unit performance whereas with gain-sharing things get local and employees expect a major say in how the system will work.

Gain-sharing can involve a lot of work to get up and running and it takes up to two years before the proper impact of the system can be seen.

According to Mr Kearney of SIPTU, gain-sharing is still in the early stages here and most Irish enterprises are not far enough along the road to evaluate the benefits. Several companies are ahead of the gain-sharing posse, however, including the Jurys Doyle Group, Tara Mines and Hewlett-Packard.

According to the NESC report, there is considerable case study evidence overseas to suggest that gain-sharing can contribute to improved performance and reductions in both grievance and absenteeism rates.

One thing is certain, financial participation schemes are coming to a company near you. In an era of flexible remuneration packages, employers are looking at ways of rewarding and retaining employees. The straight salary is no longer the norm and people are looking at more advanced tailored deals.

As long as profit sharing and employee share ownership schemes are tax efficient and cost effective, they will continue to spread, according to Mr Feargal O'Rourke, partner with Price waterhouseCoopers. "In many cases it has become cheaper for an employer to incorporate profit sharing than to pay a straight salary. The clear incentive for employers is the discount that can be built in for them," Mr O'Rourke said.

Another feature of the tax-based schemes is that the opportunity to become financially involved in the company must be open to all. To qualify for the tax advantage, the scheme must be egalitarian.

There is a range of tax schemes designed to foster financial participation. These schemes are now more tax attractive to workers and their employers than straightforward cash bonus payments. It's not all plain sailing for employers who have a certain amount of ground to give up. Mr Pat Delaney, of the Small Firms Association, believes financial participation is the way forward, but he has identified some problems that employers may face.

"Particularly for smaller companies, the valuation of shares can present difficulties and there is a lack of workable exit mechanisms. Allocation is also problematic with regard to working out the best criteria," Mr Delaney said. It is often the case that small firms do not want to diminish their equity base and problems may arise where employees are entitled to information as shareholders, according to Mr Delaney.

Gain-sharing is more attractive to smaller employers in Mr Delaney's experience and is becoming a more common way of retaining key staff.

"We are committed to profit sharing and gain-sharing under the PPF and we see it as one of the key ways in which small business can compete with larger businesses." There is no doubt that the practice of financial participation is about to take giant leaps here in the Republic, according to SIPTU's Mr Kearney. "In the last six months, there has been what can only be described as a tidal wave of conversion to the merits of financial participation," he says.

Mr Kearney's forecast is that, over the next six to nine months, there will be an explosion in profit sharing. His prediction is based on the extent to which companies are already involved in the consultation process.

One well-known company which has a long experience of profit sharing is Irish Distillers. A scheme was introduced in the mid-1970s following recurring disagreements about the Christmas bonus.

Since then, a fixed percentage of profits has been set aside and paid to all employees. Initially, the sum was quite modest but then profits grew considerably and the number of employees decreased over the years. Now, according to the chief executive Mr Richard Burrows, it's of significant benefit to the staff.

In the early 1980s, the staff used profit sharing to buy shares in the company and virtually everyone took their profit entitlement in the form of shares. "Profit sharing doesn't completely do away with the adversarial relationship between management and staff, but it makes all employees more interested in the company. Now our employees hold shares in the parent company and have a keen interest in finance.

"The first question asked around here in the morning is the Pernod Ricard share price," Mr Burrows said.