Many start-up employees are motivated to work overtime through profit-sharing in the company. But many employers leave them in the dark about how the value of their company shares will develop.
(Photo: AFP)
Actually, employees of German start-ups would have to flee in droves. Because the much-cited crisis is likely to hit many of them harder than their companies. The worst thing is: people simply keep silent about it.
Specifically, it is about employees who forego part of their salary and in return should participate in the company’s success. These participation programs are a fine thing – as long as things go well: for both sides.
Without participation programs, start-ups would have little to offer skilled workers. With the programs beckons the chance to become rich one day.
This prospect motivates “backend engineers”, “customer success managers” and “senior brand designers” for years. Every additional line of code, every happy customer and every creative idea brings the IPO and the rain of money closer. In many start-up offices, there are more sleeping bags than overtime complaints.
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As soon as things go badly, things look different: That’s okay and everyone involved must be aware of it. With the start-up idea, the dream of a house by the lake dies.
However, it becomes unfair when founders allow employees to continue dreaming, even though they already suspect that the house will remain a castle in the air. This lack of transparency is intolerable – but not uncommon.
Especially now in the crisis, financing deals are being made where investors can protect themselves against losses and employees can get nothing. Every founder has the right to save his company in this way. But it seems fundamentally wrong that they do not have to inform employees about it immediately.
Lindner should reduce the tax on investments – under clever conditions
Politicians and especially Christian Lindner should reconsider this, who now wants to strengthen the instrument and massively reduce taxes on employee participation.
Founders and investors have long been demanding that start-up employees should pay the lower capital gains tax on their shares instead of income tax. They argue that they use their wages as an investment.
Lindner’s proposal now actually contains a flat tax rate that corresponds to the capital gains tax. However, there can hardly be any parallel. With stocks and bonds, investors know the performance and can decide whether to spend their money differently.
However, that would also be a very good idea for start-up shares! Every public company must promptly disclose information that could materially affect the value of its stock. The rule is intended to protect other players in the capital market from being worse off than insiders. Start-up employees should also be entitled to this protection.
>> Now also read: Employee stock ownership is riskier than you think
In addition, Lindner could consider where he can get the lost tax money back. Most start-ups with employee participation programs today do not issue real shares, but virtual options on company shares. These are then tax deductible for the company as soon as profits are made. Lindner could delete this deductibility.
Germany should indeed set itself the goal of offering the best conditions for start-ups in the world. But it doesn’t hurt to involve the successful start-ups more. On the contrary: This could make the framework conditions for international skilled workers even better.
In the short term, however, all that remains is to appeal to the common sense of employees and founders. Anyone who receives part of their salary in company shares should also demand transparency about their performance. And anyone who is seriously interested in Germany as a start-up location should think twice about which example to set.
More: Will these 36 billion German start-ups get through the crisis?