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

start-up employee

The companies want to attract young talent with employee participation schemes.

(Photo: Imago/Westend61)

Berlin Employee share ownership is one of the most important ways for start-ups to recruit talent. They ensure that the young companies are able to retain top managers and promising junior staff, despite often lower salaries. In a Handelsblatt survey, twelve of the largest German start-ups provide an insight into how they let employees participate in the company’s success.

According to Yoko Spirig, co-founder of the Ledgy platform, almost all of Germany’s top unicorns involve their employees in the company. The Swiss should know. In many cases, their company provides an overview of the shares with the software of the same name. “In recent years, employee share ownership has spread across Europe. This is probably related to the international investors, but above all to the increasing maturity of the ecosystem,” says Spirig.

Some of Germany’s biggest unicorns, i.e. start-ups with a valuation of more than one billion dollars, took part in the Handelsblatt survey. An overview of the results:

Who uses which programs?

The two most important variants of employee participation in Germany are ESOPs (Employee Stock Option Plans) and VSOPs (Virtual Stock Option Plans). With ESOPs, employees can purchase real shares at a predetermined price, which is usually below the market price, with VSOPs only virtual shares.

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Taxation, which is based on the shares, but not on whether the employee has already received an inflow of money (dry income), is a topic of discussion again and again. Before a start-up is sold or goes public, employees usually cannot sell their shares. The new key issues paper by Federal Finance Minister Christian Lindner (FDP) is intended to solve this problem.

>> Read here: Lindner is planning these changes for employee capital participation

The distribution is balanced among the start-ups surveyed. While Commercetools, Trade Republic, Sennder, Personio and GetYourGuide allocate virtual shares in their companies, Staffbase, Celonis, Taxfix, Raisin and Wefox rely on ESOPs. The travel platform Omio regulates participation differently and offers new employees a fixed number of stock options that run for three years, depending on their position in the company.

startup

Involving your employees is becoming increasingly common in Europe.

(Photo: dpa)

Fintech Scalable Capital, in turn, operates a virtual option program (VOP) in which appropriate options are issued to employees. In addition to ESOPs, Celonis also offers Restricted Stock Units (RSUs), the issuance and sale of which are subject to certain restrictions.

Who gets shares?

Martin Böhringer, head of the Chemnitz platform for employee communication, Staffbase, explains: “We see our employees as owners who naturally participate in increasing the value of the company.” A software developer, for example, receives a certain number of options in the company in addition to her salary . At Staffbase, every employee who works at least 25 hours a week gets this opportunity.

>> Read here: Motivation through participation: Ledgy wants to make it easier for employees to participate

At Celonis, Commercetools or GetYourGuide, the entire workforce can also take advantage of employee participation schemes. In many other start-ups, however, employees only benefit from a certain seniority. For example, the Berlin fintech Raisin offers employee participation from the middle level. At Sennder, for example, all those employees who have primary personnel responsibility can acquire shares.

What is the total share?

According to the information, the total share that all employees together own in the start-up varies by only a few percentage points. However, not all unicorns wanted to give specific information. Logistics company Sennder said it reserved 12 percent in employee stock options, 2 percent more than Staffbase. At the Munich HR start-up Personio, as well as at GetYourGuide, it is 15 percent, and at the specialist for data-driven process optimization, Celonis, it is one fifth.

Entrepreneur Spirig sees a trend. “Previously, an average of ten percent of the company was reserved for employee participation, now it’s a good 15 percent,” she says. In the US, the percentage is even higher. On average, employees there own a fifth of their company.

How can employees find out about their shares?

The value of investments is constantly changing and varies from employee to employee based on seniority and length of service with the company. In addition, financing rounds can throw everything upside down again. This was also the case with Taxfix, when in June 2020, after completing a round, all eligible former and current employees had the opportunity to sell part of their virtual assets.

To provide an overview, many start-ups use special application programs such as Ledgy or Shareworks from Morgan Stanley. The start-up Personio wants to ensure even more transparency: “In addition, we have internal documentation with general information about the Personio program that is accessible to everyone, and we offer regular training and Q&A sessions.”

More: Founders sound the alarm and want more money for growth and innovation

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