Wages in Partnership Contract

Fatwa ID: 04760

Answered by: Shaykh Umer Khan

 

Question

 

Two men are business partners.

One partner says you either take money according to the percentage you own or you take wages for the working hours. You can’t take both as it is haram (according to all madhhabs apparently).

The other says you can take the money due according to the percentage you own in addition to wages for working hours.

Any idea what’s going on? If more details are needed let me know insha Allah.

 

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

 

Answer:

 

The default and predominant opinion in the Shafiʻī, Mālikī, and Hanafī madhhabs is that a partner may not take a salary, but the Hanbalī madhhab permits this with certain conditions [1]. The main reason that employment may not be combined with the partnership is that this could result in a risk-free profit to the partner, and therefore, if the partnership suffers from a loss, this partner would not take a loss in proportion to his or her stake in the partnership. Another reason for the prohibition is that the partner may become lazy and not put as much effort into earning a profit, as he or she already receives a salary. Therefore, it is considered best to adjust the profit percentage, thereby providing a larger amount to the person who is putting in extra effort, and not give them a salary.

 

In contemporary times, some Hanafī scholars (such as Mufti Rashīd Aḥmad Ludyānwī [2]) have allowed engaging in employment and partnership at the same time, but with conditions. The main conditions are as follows:

  • The employment agreement should be a completely separate contract than the partnership agreement.
  • Any salary and benefits from employment should purely be for specific work performed by the employee, and not a means to earn extra profit.

 

 

Only Allah knows best

Written by Shaykh Umer Khan

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

[1] al-MughnĪ, 5/28

[2] Aḥsan al-Fatāwā, 7/321

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