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Financial Participation

The incidence of employee financial participation in Germany is at an average level internationally. Only one tenth of all companies practice profit-sharing and only 2% have employee share ownership schemes. The concept of employee financial participation has been in and out of public debate in the last decades, with varying intensity. The end of 2005 saw the debate gaining ground, mainly due to political focus. This ended up with the adoption of a new law promoting employee share ownership (the "Mitarbeiterkapitalbeteiligungsgesetz”) in early 2009. The political goal defined in the law is greater employee participation in the success and capital of companies.


The original impetus for the debate came at the end of 2005 from the then Federal President Horst Köhler. He proposed increasing the share held by staff in the capital of the companies they worked for, allowing employees to participate in the positive development of the company. The coalition parties of that time, the CDU / CSU and the SPD, each took up this suggestion, working separately on different ways to strengthen and expand employee financial participation schemes. In the CDU / CSU model ("Corporate Alliances for Social Capital Partnerships"), the focus was on company-level solutions giving employees direct participation in the companies they worked for.1 The contrasting SPD model ("Germany Fund ") foresaw participation schemes on a supra-company level.2

The long debate came to an end in early 2009 with the adoption of the law promoting employee share ownership (the "Mitarbeiterkapitalbeteiligungsgesetz”) by both chambers of the German parliament, the Bundestag and Bundesrat.3 The new law contains elements of both the SPD and CDU/CSU concepts. The political goal defined in the law is greater employee participation in the success and capital of the companies they work for. Tax incentives for the financial (tax-based) promotion of employee participation schemes have been raised and the range of schemes extended, for example through the introduction of so-called "employee participation funds" (Mitarbeiterbeteiligungsfonds). These are designed to improve the framework conditions for the introduction of participation schemes in particular in small and medium-sized enterprises (SMEs). The new regulations only apply to share ownership schemes. Profit-sharing schemes remain unsupported.



The main new features of the law which came into effect on 1 April 2009:

  • an increase in the state-funded bonus on employee savings (Arbeitnehmer-Sparzulage) used to finance the purchase of shares (asset accumulation in the form of company shares, etc.) from €72 to €80 a year (pursuant to the 5th Asset Accumulation Law / 5. Vermögensbildungsgesetz).
  • an increase of the tax and social security contribution thresholds for employers participating their employees in company capital (non-cash benefit) from €135 to €360 a year (pursuant to the Income Tax Law) and
  • the option of "supra-company” holdings via employee participation funds. These invest in different companies, supposedly ensuring professional asset management (pursuant to the Investment Law).

Four years after the introduction of the employee share ownership law, there are still no concrete indications that this law and its associated tax breaks have led to an any significant increase in uptake (the regulations on workers’ participation-special funds were even abolished in July 2013). It remains to be seen whether the changed incentives will have any long-term effects on the uptake and use of employee share ownership schemes in practice.



The debate over employee participation was continued during the economic and financial crisis 2008/2009, although from a different perspective. In connection with the difficulties experienced by such companies as Opel or Schaeffler, the debate centred on the extent to which employee share ownership can be another instrument, besides flexibilisation of working time (short-time working, reduction of overtime and so on), to rescue companies in difficulties. In the case of Schaeffler, Opel and Daimler, for example, company managements, IG Metall and works councils had actively begun to negotiate workers’ participation schemes. Many companies had got into difficulties due to falling orders and financial bottlenecks. Liquidity had to be strengthened and costs reduced in the short term in order to avoid looming lay-offs. The basic idea was that employees could help to boost capitalisation by renouncing a portion of their wages, reinvesting unpaid profits from gain-sharing or renouncing wage increases (based on collective agreements). In return for renouncing wage claims employees should receive shares in the firm. At the same time, employees – this was the demand from the employees’ side – should also be given a say and a share in future increases in company value. This scheme was not implemented in practice, however. Decisive here, besides the rapid economic recovery, was the tax treatment of participation, which hindered rapid and uncomplicated implementation.4

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.