Employee participation and profit-sharing schemes are gaining traction globally as tools to engage and motivate employees. However, in the Netherlands, this concept remains relatively unknown and is implemented by only a small percentage of companies. This article highlights the application of employee participation and profit-sharing in Dutch SMEs and large enterprises. We discuss the prevalence, characteristics, motivations, and obstacles that managers encounter when implementing such schemes.

Low Awareness: A Major Barrier to Employee Participation

A recent survey among 606 managers from companies with more than 10 employees reveals limited familiarity with employee participation and profit-sharing. Only 12% of managers indicate they are well acquainted with these concepts, while a striking 88% admit to knowing little, very little, or nothing at all. This lack of awareness is a major barrier to implementing employee participation in the Netherlands, as many companies are simply unaware of the possibilities or advantages such schemes can offer.

Employee Participation and Profit-Sharing: Current Situation in the Netherlands

Data indicates that 17% of companies in the Netherlands with more than 10 employees offer some form of employee participation. Profit-sharing schemes are somewhat more common, with 32% of companies implementing them. A small percentage (7%) offers both employee participation and profit-sharing. Interestingly, employee participation is more prevalent in larger companies: 14% of companies with 10-50 employees offer employee participation, which rises to 19% for companies with 50-250 employees and 17% for companies with over 250 employees.

Regional and Sectoral Differences

In the Netherlands, employee participation is concentrated in the Randstad region, particularly in the provinces of North Holland, South Holland, and Utrecht. For instance, 29% of companies in Utrecht offer some form of employee participation. Profit-sharing schemes are also common outside the Randstad, with Gelderland and North Brabant standing out.

Sector-wise, employee participation is most common in the information and communication sector, as well as in financial services. Profit-sharing, on the other hand, is more widely applied across sectors such as industry, construction, transport and storage, and specialized business services.

Motivations and Obstacles: Why Implement or Avoid Employee Participation?

Motivations for Employee Participation

The primary reasons managers cite for offering employee participation include:

1. Increasing Engagement: Especially in medium and large enterprises, employee participation is used to foster employee engagement. Companies find that ownership leads to greater responsibility and commitment among employees.
2. Retaining and Attracting Talent: In larger enterprises, employee participation serves as a means to retain and attract talent. By offering ownership, companies become more appealing employers.
3. Aligning with Mission and Vision: For smaller businesses, employee participation often reflects the company's mission and vision. Companies aim to demonstrate a commitment to inclusivity and shared ownership.

Obstacles to Employee Participation

Despite the advantages, managers face several obstacles when implementing employee participation:

1. Lack of Awareness and Information: Many managers lack knowledge about setting up a participation scheme, including necessary steps or the tax and legal implications.
2. Implementation Complexity: Managers view the complexity of setting up an employee participation program as a significant hurdle, especially concerning scheme management and long-term financing.
3. Financial Barriers: Some companies, especially those with declining revenues, struggle to allocate financial resources for a participation scheme. When profits are under pressure, enabling employee participation in a profit-dependent scheme is challenging.

Examples from Practice

A prominent example of a large Dutch company successfully implementing employee participation is Alfa Accountants and Advisors. Alfa offers a Management and Employee Buy-Out (MEBO) scheme, allowing any employee with a permanent contract to purchase certificates. This scheme is part of Alfa's sustainability strategy and contributed to its B Corp certification in 2014. Alfa reports that the scheme fosters a stronger sense of camaraderie and entrepreneurship among employees.

Another example is the Donker Group, which partially transferred its shares to a Management Buy-Out team in 2019, also making a significant portion of share certificates available to employees. The company aims to gradually transfer ownership to its employees, contributing to long-term sustainability and employee engagement.

What Can the Netherlands Learn from Abroad?

Experiences in other countries show that employee participation enhances employee engagement and motivation and improves business outcomes. In the UK, the introduction of the Employee Ownership Trust has led to a significant rise in employee participation. In Canada, new regulations in 2024 introduced a tax exemption on the first 10 million dollars for selling a business to an Employee Ownership Trust. Germany and Slovenia are also developing new schemes to encourage employee participation.

To grow employee participation in the Netherlands, the government might consider similar tax incentives and legal support, which could encourage companies to rethink their ownership structure and actively involve employees in the organization's success.

Conclusion: The Future of Employee Participation in the Netherlands

Although employee participation is still relatively unknown in the Netherlands, experiences at home and abroad show it can be a powerful tool for building resilient businesses and engaging employees. Increasing awareness and supporting companies in establishing participation schemes is key to broader adoption.

At Share Council, we help companies set up employee participation and profit-sharing schemes. Contact us today for a free consultation and discover how your company can benefit from employee participation. Together, we can build a future where ownership is shared, and companies and employees thrive!

Source: https://www.uu.nl/en/news/room-for-improvement-employee-engagement-through-participation