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Financial Participation

Workers’ financial participation schemes in the Netherlands are based primarily on national ‘save-as-you-earn’ schemes offering attractive tax incentives for both employers and employees when employee shares are purchased. However, the majority of employees prefer low-risk savings into a special account, even if taxation is not as favourable.

 

Initial ideas on employee financial participation in the 1980s were the subject of controversial debate, but resulted in concrete proposals for tax incentives for profit-sharing schemes. From 1994 on, a number of agreements on employee financial participation have been further developed and tax incentives improved with the intention of encouraging employers to introduce participation schemes and employees to participate (the ‘Vermeend/Vreugdenhil’ Act). In addition a legal framework for employee financial participation was established. Nevertheless savings plans and employee funds still account for the bulk of schemes used.

 

 

In the Netherlands around 3.6% of all companies with 10 employees or more have a workers’ financial participation scheme.1 In the past ten years the number of companies with employee share ownership has almost doubled. Half of these companies are listed and/or part of an international group. In order to provide their employees with the option of participation non-listed companies often establish a foundation (‘stichting administratiekantoor’ or trust). This purchases and administers the relevant shares for employees and exercises voting rights en bloc.2

In order to improve the diffusion of employee share ownership schemes, in particular in SMEs, the Nederlands Participatie Instituut took the initiative in 2009 to develop a ‘simple core scheme’ of workers’ financial participation in the Netherlands. This was intended to be extremely flexible in order to meet enterprise-specific, personnel and organisational challenges. The proposals encompass, on one hand, general principles, for example, that the involvement of employees in participation schemes should be voluntary; wage components should not be used for participation schemes; and employees and employees’ representatives should be involved in the development of the scheme. On the other hand, the proposals refer to the development of directives, among other things, on eligibility for participation (at least 75% of the workforce) and participation thresholds (maximum of 10% of the annual gross wage of an employee may be invested in this way; the upper limit for the holding of any one employee is 4.99% of company shares).3 This core scheme must be developed further in the political debate. It cannot be determined at present to what degree the legislator will take up these proposals.

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.