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The Structure of Employee Share Ownership Programmes in Start-ups and SMEs in the Light of the Reform

Employee share ownership programmes have the potential to bring benefits and opportunities for all parties involved.

Young companies can use employee share ownership programmes to compensate for competitive disadvantages. Often they can hardly compete financially against established companies in the market for the best talent. So to compensate for this deficit in the fight for highly qualified skilled workers, other means of incentivisation are needed: Companies offer potential employees a shareholding in their company as an attractive supplement to their salary. This way, highly qualified employees can be attracted without the fixed salary costs becoming too high for the young company.

We all work with greater motivation when we participate directly in the fruits of our labour. The employee can thus be successfully motivated and tied to the company through participation in companies, as he or she shares in the financial success of the same. This leads to lower fluctuation, lower sick leave and growing willingness to work. The employee is not only working for his employer, but also for himself. This leads to an increase in productivity and personal satisfaction of the employee. Not least, employee share ownership programmes also mean the opportunity for private wealth accumulation for the employee.

However, employee share ownership programmes do not only offer advantages to those directly involved. Employee share ownership also means promoting innovation. Good framework conditions for employee programmes can prove to be a locational advantage for a sustainable start-up ecosystem. Employees often become entrepreneurs themselves through employee share ownership programmes, either by founding new companies themselves or by reinvesting the wealth they have gained through their share ownership in other start-ups.

To ascertain the impact of the reform on the structuring of employee share ownership programmes, this paper first looks at the requirements that are fundamentally placed on employee share ownership (cf. 1). This is followed by a presentation of the current structures of employee share ownership programmes (see 2) as well as a brief description of the reform (see 3). The article concludes with an outlook on whether and to what extent the planned reform will lead to changes in the structuring practice (cf. 4).

You can access the entire article here.

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