There is no way around employee participation

Our guest author Eric Demuth calls for standardized regulations for employee participation to finally be created in Europe. Otherwise, start-ups will not be able to attract good employees.

No world-class product without a world-class team: as simple as this may sound, the implementation is bitter. The talent market has never been so competitive.

The fact is that it is a Herculean task for any scale-up to get the crème de la crème of the international tech scene. In my opinion, the best incentive of all is to involve talent in the company's success and turn employees into co-entrepreneurs.

Equity is the pull factor par excellence: there is no way around employee participation. Silicon Valley has shown the way. People there have been doing something with the topic for over 30 years. Just take the story of the part-time masseuse who joined Google early on and eventually became a millionaire. Or think of the so-called PayPal mafia and its highly sustainable impact on the entire industry, where many former PayPal employees have now built up very large companies themselves or become successful investors.

The advantages of employee share ownership are obvious: employees have a direct influence on the company valuation with their performance, can contribute, participate - and earn a share of the profits. Share options increase in line with the valuation. Those who are involved think more carefully about how they contribute to the company and are even more committed. Keyword retention management: employee participation also has an effect on loyalty. No bonus can achieve the same level of identification with the employer as owning shares in the company. The most important criterion for this is that people can identify with the vision and the company and believe in their own impact. And thinking further: employee share ownership can strengthen employees in particular. For example, anyone who has already worked for three successful companies by the end of their 30s would already have a portfolio that could be used for private retirement provision. Alternatively, the capital can be used to set up their own companies - this would accelerate a cycle on which we will soon be more dependent than ever. In short: it pays off for all sides.

In Austria, only around six percent of employees have an equity stake in their employer's company. This is hardly surprising, as tax incentives are rather low - which explains the low level of willingness to implement employee share ownership schemes. You have to get creative to find adequate solutions and answers to the problem of taxation and all the blatantly outdated conditions - the next huge locational disadvantage. We at Bitpanda have solved this through virtual investments. What is missing here is fairer taxation by the state. We are at a massive disadvantage compared to other countries that have solved employee shareholdings properly in terms of taxation.

The technology scene is in danger of being left behind

It's also stupid in Germany, which is still a long way from being an attractive and competitive fund location despite recent adjustments. I don't understand this German fear of reform. Instead of taking useless mini-steps over many years - until you're on the verge of a bang - why not adapt the laws properly and bring them up to date?

More progressive solutions in terms of employee participation have long been standard in all major international start-up locations. In the UK, employee participation is even part of the economic and corporate culture of "popular capitalism" and is primarily seen as a means of increasing productivity. The Enterprise Management Incentive Scheme (EMI), which was introduced in 2000 and has since been revised, is a highly beneficial scheme used by almost all UK technology start-ups.

I repeat: if we do not manage to overcome the immense talent shortage, then the European technology scene will be left behind. We have already lost out here in terms of funding from European financiers for scale-ups.

The equity issue can no longer wait, simpler rules for start-ups are needed instead of the cumbersome and bureaucratic workarounds. Ideally, the possibilities and rules should even be harmonized across the EU. After all, different tax laws prevent the practical implementation of investments in companies that, like us at Bitpanda, operate in several countries. In all of this, we need to think in the age of technology and the Internet, i.e. three times as fast. Otherwise, the battle for talent between EU countries will intensify massively, and we cannot want that. We have to start thinking globally in a global competition. At the moment, we don't even think European, we still think nationally.

About the person: Eric Demuth, 34, was born in northern Germany, lives in Vienna and founded Bitpanda there in 2014. Every two months, he shares his views on current topics from the start-up world here.