How to retain and recruit good employees for your company? Employee participation is a great way to achieve that goal. You are giving your valued employees the opportunity to play an active part in your company’s financial growth. Read this article about the positive effect of employee participation.

Text: Robert Van BoxtelSenior Corporate Finance Advisor at ABAB

Added value Employee participation

Employee participation increases the engagement and motivation of your employees and ensures long-term bonding. This leads to better business performance and higher value of your company. Most employers and employees in SMEs are positive about employee participation. Hence we see it being used more and more in SMEs. So you need to investigate whether this type of participation is suitable for your organization.

What is employee participation?

With employee participation, your chosen employees get a stake in your company. There are different forms of participation. For example, you can choose a structure where only employees receive (extra) pay or results-based bonuses. Or you give them an opportunity to buy shares. There are all sorts of variations on participation and reward in between.

Objectives Employee participation

Employee engagement isn’t just about bonding, charming and allowing employees to grow. For example, it can also be an ideal tool for attracting new talent. In addition, participation also serves other purposes, such as facilitating the acquisition of the company by one or more employees or financing company expansions.

Buy shares or certificates

When employees are given the opportunity to buy shares, they have a say in the company they operate in. You can also organize it through a foundation called the Stichting Administratikantur (STAK). The trust holds a portion of the shares and issues certificates. The control rights of Depositary Receipt holders can be arranged as desired, from profit rights to full control over the board of the trust. And there are other constructions that can be used, for example option rights or profit certificates.

How to choose Participatory Form?

Which form you choose is very important. It should be tailored to your company, policy and your and your employee’s financial situation. If you’re considering using employee participation, there are some important questions to answer beforehand:

• Which employee(s) are eligible?
• Does the employee have rights in the company?
• Is the employee ready to invest?
• How does employee participation fund?
• How long should the employee be in contact?

Based on the answers, you can advise the most suitable construction.

road map

It is important that you get good advice on legal, financial and tax matters. A step-by-step plan helps with this. Steps you should follow in any case:

Step 1 List your needs and wants, but also the needs of your employees

Step 2 Evaluation of your company

Step 3 Analysis of Tax Consequences

Step 4 Analysis of Legal Effects

Step 5 Find funding for the participant/participant

Step 6 Coordination of contracts with tax and customs administration

Step 7 Record of agreements made (e.g. participation agreement, foundation conditions, bonus plan, etc.)

Get good advice every step of the way. A diverse team with knowledge of corporate finance, tax and legal matters preferred. Are you going to take the next step?

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