Europe's big new boost for employee share schemes

Posted by admin at 15:51 on 13 Feb 2017

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On 17th February the European Economic and Social Committee published details of a major new initiative designed to encourage employee share ownership across Europe.

The Committee aims to kick-start the application of Employee financial participation (EFP) at various levels, such as profit sharing, employee share ownership schemes and Save-As-You-Earn (SAYE) schemes. The Committee cites evidence that employee share schemes and other forms of employee participation result in improved motivation, increased productivity, improvements in the quality of corporate management, higher return on capital employed and improved company credit ratings. It also recognises that tax incentives will be an effective instrument for promoting the dissemination of employee share ownership.

Is all this just another example of lengthy Euro-waffle? It seems not. Specific action is planned to raise awareness of EFP across member states, to identify obstacles to cross border schemes and to devise solutions.

Additionally, the Committee states that:

  • businesses operating across borders should be offered help, in particular in overcoming tax obstacles;
  • there should be mutual recognition of share schemes offered by individual EU states across borders, with a view eventually to creating uniform tax incentives;
  • new forms of EFP are to be developed with a view to increasing take up of employee participation;
  • examples of best practice will be publicised.

The Committee singles out trust based employee ownership schemes as example of good practice, citing several major European companies as examples of how this should be done. These companies include: AUCHAN (France), HOMAG AG (Germany); PFW Aerospace AG (Germany); Voestalpine AG (Austria); Oktogonen Foundation (Sweden); Herend-ESOP (Hungary); Eircom and Aerlingus from Ireland and Tullis Russell from the UK.

But much of the Committee's focus is on smaller, private companies. In particular, the statement is clear that the use of employee buyouts as a vehicle for business succession is to be encouraged. The urgency of this latter task is underlined by the fact that, over the next ten years, one third of SMEs in Europe will change hands. This will affect up to 690,000 unquoted companies and 2.8m jobs every year across the 27 Member States.

If you would like more information about the topics raised in this articles, please call The RM2 Partnership on 020 8949 5522 and ask to speak to one of our advisers.