According to a Bitkom survey of 148 German startups, another 40 percent of startups can imagine implementing employee participation in the future. Only 7 percent, however, rule it out entirely. Bitkom President Achim Berg explains:
"Internationally, it's common for startups to offer equity in the company in the competition for talent. In Germany, this is still too rare because the legal regulations are not practical and make employee participation unattractive. In its startup strategy, the federal government promises improvements, and these are urgently needed."
In Germany, employees who become involved in a startup are required to pay taxes before they have even sold their shares. However, this can become a problem for them if their shares lose value after they have paid their taxes and duties. This is what recently happened to the German employees of the Swedish payment service provider Klarna, as the magazine “Finance Fwd” Many startups (78 percent) reported in the survey by Digital Association then also stated that it would help them if politicians made employee participation more attractive.
Different types of employee participation
The most widespread are so-called virtual investments, which 41 percent of startups use (2021: 36 percent). These are "fictitious" contractual obligations where the payout is tied to the fulfillment of certain conditions, such as an IPO. Only 6 percent (2021: 7 percent) of startups use share options, while 3 percent rely on real shares (2021: 2 percent).
Fifteen percent of startups that offer some form of employee participation include all employees without exception. In about one-third (31 percent), the offer is exclusively for managers. And half (54 percent) involve both managers and selected employees.
