Reform of employee participation – This is how start-ups and associations rate Lindner’s plans

Berlin Start-ups and associations have been waiting for the reform of employee participation in Germany for a long time. The plans of Federal Finance Minister Christian Lindner (FDP) are now largely approved.

Christian Miele, CEO of the start-up association, believes that the right adjustments are being made. Like many young companies, he is now pushing the pace of implementation. So far, the legislative process is still in its infancy.

In essence, Lindner plans to increase the tax allowance from the current 1440 euros to 5000 euros, to defuse the so-called dry income problem and to make more favorable conditions accessible to a larger number of start-ups.

The regulations currently in force for employee participation had been sharply criticized by the industry. As recently as autumn, more than a dozen of the leading German start-ups issued a fire letter calling for changes so as not to fall behind in international comparison. The focus was on rigid taxation.

“The decisive factor is whether and in what form changes are made quickly that raise employee participation in start-ups to the level of American market standards,” says Martin Böhringer, head of the Chemnitz-based HR start-up Staffbase.

Start-ups demand speed when it comes to implementation

Employee participation schemes are the key means used by start-ups to retain top talent. As a rule, they cannot pay the salaries of large corporations, but they can draw attention to themselves with participation programs and thus let employees participate in the company’s success. This increases identification with the company, said the Berlin fintech N26.

>> Read here: Founders sound the alarm and want more money for growth and innovation

So far, however, many young companies have been dissatisfied with the applicable laws. “Germany is not competitive when it comes to employee share ownership. This means a massive locational disadvantage for innovative and fast-growing companies that depend on international specialists,” says Getyourguide co-founder Johannes Reck. He therefore expressly welcomes the initiative from the Federal Ministry of Finance.

In addition to raising the tax-free allowance to EUR 5,000, the proposal also includes long-demanded changes to dry-income taxation. The point here is that a tax liability already exists although the employee has not yet received any liquid funds from the sale of his participation. Before a start-up is sold or goes public, employees usually cannot sell their shares. After twelve years at the latest or after a change of employer, however, they must pay tax on their shares in the company – regardless of whether income has already been generated from them.

>> Read here: Enpal, Staffbase, Wandelbots: Three success stories from the East

Lindner now wants to extend this period to 20 years. In addition, he offers the “possibility of further deferring taxation”, as stated in his key issues paper. Tamaz Georgadze, head of Berlin fintech Raisin, believes that this takes into account the sometimes long growth cycles of start-ups.

Hanno Renner from HR start-up Personio also welcomes the move and gives an insight into the difficulties so far: “The so-called dry income taxation ensures that talented people often do not sign with start-ups in the first place – for fear of high tax bills that they can’t afford.”

The Greens support the plans

According to estimates by the Federal Association of Employee Participation (AGP), around 700 public limited companies and 3,000 to 3,500 medium-sized companies in Germany are currently using employee participation programs.

>> Read here: Comment: The government needs to rethink start-ups

AGP managing director Heinrich Beyer also sees progress in the key points revised by the Federal Ministry of Finance. However, he makes a specific point that “represents a step backwards compared to the current regulation”.

It is about the deferred compensation, which is no longer tax-privileged in return for the increase in the tax-free allowance. “Which company gives an employee 5,000 euros a year tax- and duty-free in addition to the normal remuneration,” Beyer questions the practicability of this planned regulation. The increase in the exemption threatens to fizzle out.

The plans do not go far enough for the co-head and founder of the Berlin fintech Scalable Capital, Erik Podzuweit. According to him, the exempt amount would have to increase to at least 25,000 euros and the taxes would only be due when the time of the exit – i.e. the cash inflow – took place.

The thresholds ensure that scale-ups in particular, which are particularly involved in international competition for the best talent, cannot benefit from the improved regulations. Raisin boss Tamaz Georgadze

Podzuweit also wants the planned benefits not just to be limited to small and medium-sized businesses. Lindner now also wants to grant tax benefits to companies that employ up to 500 people and have an annual turnover of 100 million euros. Previously, the limits were 250 employees and maximum revenues of 50 million euros.

“The thresholds ensure that scale-ups in particular, which are particularly involved in international competition for the best talent, cannot benefit from the improved regulations,” says Raisin boss Georgadze. Scale-ups are particularly fast-growing young companies.

The revised key issues paper has not yet been agreed with the coalition partners. However, the project has met with approval from the Greens. “I expressly welcome the idea of ​​making the rules for employee participation more attractive by increasing the tax allowance,” says Melis Sekmen, Chairwoman of the Bundestag’s Economic Affairs Committee. “It is desirable that the responsible Ministry of Finance finally starts the concrete implementation.”

mehr: This is how the German start-up elite involves their employees

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