Since the 1990s the legal framework for deferred profit-sharing has been improved. Profit-sharing schemes are more prevalent in state-run enterprises than in the private sector.
Profit-sharing schemes in particular are widespread in Finland.1 According to a study by Jones et al. (2012) workers’ participation schemes are more frequent in state-owned companies and cooperatives than in the private sector.2
Deferred profit-sharing schemes are the most prevalent form of employee financial participation. They offer tax incentives for employers and receive state support aimed at guaranteeing long-term wealth creation for employees. Payments made by employers into personnel funds are tax-deductible and not subject to social security contributions.
Employee share ownership generally occurs via the issue of employee shares. Income tax law allows employees to buy shares at a preferential price. As long as the discount does not exceed 10% and is available to the majority of employees, the discount is not subject to tax.
Since 1990 employee funds have been a widespread form of workers’ financial participation. Between 1990 and 2007 82 employee funds were established, 28 of which later folded. The still active funds cover 5% of Finnish workers, with 126,000 participating employees. Since the mid-1990s the funds have fallen out of favour somewhat, among other things, because of the development of performance-oriented pay. However, in 2005 eight new funds were registered, more than in any previous year.3
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.