Financial employee participation
Do you want to increase productivity, reward your employees, or transfer your business to them in the future? You can do this with financial employee participation. Read how it works, what forms there are, and what the benefits are for you and your employees.
What is financial employee participation?
Financial employee participation means that your employees can share in the growth and profits of your business. This can be arranged in various ways. For example, through profit distribution. Your employees then receive extra payment when the business performs well. Or through acquiring shares. Employees then have a share in the value and profit of the business. Sometimes they also get a say in decision-making. Another possibility is share certificates. These give employees a share in the profits, but no right of control. Financial employee participation is also called employee participation.
Set your goals for employee participation
With financial employee participation, you can reward and motivate employees and involve them more in your business. You encourage better performance and higher productivity. Employee participation can also be a form of business transfer. You then transfer ownership to your employees step by step.
Forms of financial employee participation
There are different forms of financial employee participation. Each form has its own features and advantages. You can divide the forms into 2 groups, profit distribution and shared ownership.
With profit distribution, your employees receive extra payments if certain (profit) targets are met. Tax must be paid on these payments. Profit distribution is also called profit sharing. Stichting Nederlands Participatie Instituut (Netherlands Participation Institute Foundation, SNPI) defines the following examples of profit distribution (all links in Dutch):
With shared ownership, your employees not only get profit sharing, but also become co-owners in your business. This can be useful if you want to retire later and do not have a successor in mind. You can then transfer your business to one or more employees if they wish.
Your employees can buy or receive shares or depositary receipts for shares. This makes them co-owners and gives them rights and obligations. With shares, they get the same rights as you: financial rights, voting rights, information rights, agenda rights, and meeting rights.
With depositary receipts for shares, you set up a STAK (Stichting administratiekantoor, an administrative office foundation). The STAK manages the shares. The rights associated with the shares are separated. Your employees get depositary receipts with which they only have financial rights and information rights. The board of the STAK has voting rights, agenda rights, and meeting rights.
Forms of employee participation for your business
The legal structure of your company determines which forms of employee participation are possible. For a private limited company (BV), there are various options, such as shares or stock option schemes. For other legal structures such as a sole proprietorship, general partnership (VOF), or limited partnership (CV), profit-sharing and bonus schemes are the most suitable options.
Benefits of employee participation for your business
Financial employee participation can have positive effects for your business and your employees.
1. Financial benefits
Your employees share in the growth and profits of your business. This can provide:
- the opportunity to build wealth
- employee engagement
- financial stability
2. Greater entrepreneurship
Shared ownership creates a positive and entrepreneurial work culture. The interests of the company and the employees become more equal. This can create:
- more innovation
- entrepreneurship
- productivity
3. Continuity and appeal
With employee participation, you can distinguish yourself as an employer. It makes your business more attractive to employees. This ensures:
- employees who want to work for your company for longer
- more focus on sustainability
- faster recovery in a crisis (more job security and less employee turnover)
4. Stronger company culture
Employees feel more committed to your business. This leads to:
- more satisfaction among your employees
- more shared ownership
- more appreciation for each other
- better performance
Success factors
Would you like to introduce financial employee participation in your business? Then focus on the factors that determine success:
- You have a well-developed legal plan that matches your objectives.
- Your plan is part of your company's policy.
- Your organisation is financially healthy, and the price-earnings ratio is good.
- You are a startup with interesting prospects.