Becoming a co-owner of a company: the benefits of employee participation

Becoming a co-owner of the company you work for is becoming increasingly popular. But why exactly? Employee participation means that employees own a part of the company they work for. This concept offers numerous benefits for both employees and employers.

Firstly, employees feel more involved and motivated when they have a stake in the success of the company. This often leads to higher productivity and improved performance. For employers, this is a fantastic way to attract and retain talent. Employees tend to stay longer at a company if they are co-owners, as they feel personally connected to the future of the company.

Additionally, co-ownership provides financial benefits. Employees can benefit from the profits and appreciation of the company. This can mean a significant extra reward in the long term, on top of the regular salary. For employers, sharing ownership also means sharing the burdens and benefits of growth and success with their team, which is good for company culture.

In short, co-ownership is a win-win situation. It increases employee involvement and motivation, while it helps companies retain talent and develop a stronger team spirit. Curious how this can work for your company? At RoundE, we are happy to help you further!

Becoming a Co-Owner in a Company?

Employee participation is a scheme in which employees can become partners or co-owners of the company they work for. This means they own a part of the company. There are various ways to achieve this. There are ways for employees to buy into the company and ways for employees to buy in without money.

Buying into the Company

There are various ways how employees can buy into the company. Let's take a look at the most common forms:

• Shares: These are pieces of the company that employees can purchase or receive. If employees have shares, they own a part of the company. They can then benefit from the profits and appreciation of the company. The downside of shares is that employees also have voting rights and thus sit in the annual general meeting (AGM). To avoid this, certificates of shares can be considered.

Note: employees can also receive shares for free (or at a discount), but the tax authorities will treat this discount as income. Therefore, income tax must be paid on this discount.

• Certificates of Shares: These are similar pieces as shares, but without voting rights. Employees have the right to a share of the profit and appreciation, but they cannot vote on important decisions within the company.

Buying into the Company Without Money

Additionally, there are ways for employees to buy into the company without money. Let's take a look at the most common forms:

• Options: This gives employees the right, but not the obligation, to purchase shares of the company at a predetermined price. This can be especially beneficial if the value of the company increases. Read more about options.
• Stock Appreciation Rights (SARs): This scheme gives employees a reward equal to the increase in the value of the shares over a certain period. They do not need to actually buy the shares but receive a bonus based on the appreciation. This bonus is tax-deductible for corporate tax, but it is taxed as income. This is a very popular scheme in the Netherlands.
• Profit Sharing: In Profit Sharing, the employee receives a financial reward if a certain profit target of the company is achieved. This reward is viewed as income, and therefore income tax must be paid. On the other hand, the costs for the employer are tax-deductible from corporate tax (VPB).
• Bonus Schemes: In this scheme, you receive a financial reward when certain goals or performances of the company are achieved. Although the employee does not become a co-owner in the company, they do get extra motivation to work harder and achieve better results.

At RoundE, we are happy to assist you in setting up employee participation for your company. This makes your employees feel more involved and motivated, leading to better performance and more success! Want to know more? Contact us and discover what we can do for your company.

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