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Manager of a business

Fatwaa ID: 748

Question:
As-salāmu ʿalaykum Waraḥmatullāhi Wabarakātuh,

A person manages a business of another and tells him that since he’s only managing it and not a business partner he wants part of the profit but doesn’t want to be part of any loss that can happen. Will this be permissible?

Answer:
In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

We take note of the details of the query. We understand that the person in reference is simply managing the business. He has not invested any capital. It is not clear whether he is getting paid or not. There are a few ways to go about with this person.

  1. The said manager can be a partner in a mudharabah venture. This is where one partner invests capital (rabbul maal) and the other partner invests his skills and efforts and manages the business (mudharib). The rabbul maal does not do any day-to-day work in the business. All that is done by the mudharib. Both partners however are equally important in their respective roles. The partners in this venture must agree to a mutual profit split from the profits of the venture. In the unfortunate case of a loss, the rabbul maal will bear the financial loss, while the mudharib will bear the loss of his effort, energy and time. The mudharib in this venture will not receive a set salary. His reward/payment is the profit he makes during the payout. In this venture, there is a possibility that he will earn a large sum each payout time, and it is also possible that he may not earn anything. This depends on the performance of the business.
  2. The manager may simply be an employee (ajeer) or an agent (wakeel) wherein he receives his monthly salary for the work or service he provides. The performance of the business does not affect his salary. He will be entitled to the agreed salary irrespective of whether the business did well or not. However, the business owner may give him an incentive along with his base salary. For example, if the business performs to this level, then you will get this bonus, and if to that level, then that bonus. In this way, the manager may be able to make more than his base salary.

In all cases, this must be discussed and mutually agreed on from the very beginning prior to the initiation of the venture.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York
https://askthemufti.us/

08/08/1444 AH – 02/28/2023 CE | AML1-7190

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين

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