How do you retain and recruit good employees for your business? Employee involvement is a great way to achieve this goal. You offer your valuable employees the opportunity to actively participate in the financial developments of your company. Read this article on the positive effect of employee involvement.
Text: Robert de BoxtelSenior Corporate Finance Advisor at ABAB
Added value of employee participation
Employee involvement increases the involvement and motivation of your employees and ensures a long-term bond. This leads to better business performance and greater value for your business. A large majority of employers and employees of SMEs are in favor of employee participation. We can therefore see that it is increasingly used within SMEs. It is therefore useful to check whether this form of participation is suitable for your organisation.
What is employee participation?
With employee participation, employees selected by you receive a stake in your business, with or without voting rights. There are different forms of participation. For example, you can opt for a construction in which employees only receive (top-up) remuneration or a performance-based bonus. Or you give them the opportunity to buy stocks. There are all sorts of participation and reward variations in between.
Employee involvement objectives
Employee participation is not only appropriate to connect, captivate and allow employees to grow. For example, it can also be a suitable instrument for attracting new talent. In addition, participation may also serve other purposes, such as preparing for a takeover of a business by one or more employees or financing business expansions.
Buy shares or certificates
If employees have the ability to buy stock, they will have a say in the operating company. You can also organize it through a foundation, called Stichting Administratiekantoor (STAK). The foundation owns part of the shares and issues certificates. The control rights of the certificate of deposit holders can then be arranged as desired, from a simple right of profit to full control within the board of trustees. And there are other constructions that can be used, for example with option rights or profit certificates.
How to choose the right form of participation?
The shape you choose is very important. It should suit your business, policy and the financial situation of you and your employee. If you’re considering using employee participation, you need to answer a few important questions first:
- Which employees are eligible?
- Will the employee also have a say in the company?
- Is the employee ready to invest?
- How does the employee finance participation?
- How long should the employee stay logged in?
Based on the answers, you can be advised on the most suitable construction.
It is important that you receive good advice on legal, financial and tax matters. A step-by-step plan helps with this. The steps you need to follow in any case are:
Step 1 Inventory of your requirements and wishes, but also those of your employees
2nd step Valuation of your business
Step 3 Analysis of tax consequences
Step 4 Analysis of legal consequences
Step 5 Identify funding for participant/participant
Step 6 Coordination of agreements with the tax and customs administration
Step 7 Recording of concluded agreements (e.g. participation agreement, basic conditions, bonus system
Get good advice every step of the way. Preferably by a multidisciplinary team with knowledge of corporate finance, taxation and legal affairs. Are you going to take the next step?
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