The report was presented in the plenary yesterday. At that occasion, rapporteur Phil Bennion (ALDE) explained the benefits of EFP for companies and especially SMEs as “a concrete way for companies to share success”. In the Strasbourg hemicycle, Bennion called for the EU to act, pointing out the lack of information within the EU, the lack of legislative incentives in some Member States, the different national taxation as well as the multitude of existing ESO models hampering companies that operate cross-border. To overcome these problems, Bennion proposes to share best practice examples between the Member countries, possibly leading to mutual recognition of these schemes. At this regard, Bennion refers to the current EU pilot project and the benefits that a Virtual Centre for EFP as well as an effective tax rate calculator could bring in order to augment the available information. Finally, he invited the Commission to conduct an impact assessment for a 29th regime for EFP.

– These topics will be part of our Brussels conference “Taking Action: Promotion of Employee Share Ownership” that will take place on the 30th of January 2014. –

In the following contributions, MEP Sari Essayah (EPP) pointed out the importance of the exchange of information between Member States. Shadow rapporteur Evelyn Regner (S&D) mentioned the Spanish Sociedades Laborales (click here to read more about this topic) as a well-working example for alternative EFP models. She also highlighted the voluntary character of EFP schemes which should always come on top of basis pay.

In his speech Commissioner Janez Potočnik emphasised the role of EFP as a source for long-term investment and he underlined Barnier’s support for the idea of a 29th regime. He further referred to the conference on ESO on 30 January, presenting an opportunity to get the feedback from the various stakeholders.

11.00 am – 1.15 pm Employee Financial Participation in SMEs: A strategy for labour market policy and regional business development.

At the time we assumed that all disqualifications of SLs (disappearance from the registry of SL) were due to liquidation or bankruptcy and calculated the survival rate accordingly. However, it turned out that an additional reason for their disappearance was that some SLs convert into conventional companies. They continue to exist with substantial employee ownership but do no longer qualify as SL, for example, because the employee ownership rate drops below 50%.

In fact, the reason that they disqualify is often that they become “victims of their success” (as opposed to going bankrupt). From what we know now, between 1 January 2010 and 31 December 2012 in the Basque Registrar of “Sociedades Laborales” of 110 disqualifications 51 became conventional companies, i.e., 46.36% of which only 8 have closed down.

This means that the survival rate we previously calculated for SLs in Basque Country is in fact much higher. Of the 110 former “Sociedades Laborales” which were previously reported bankrupt or liquidated 39% still exist nowadays but are conventional companies still with substantial employee ownership (but less than 50%).

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Employee financial particiaption (EFP) in Spain largely takes the form of Sociedades Laborales (Worker-Owned Companies). This concept is probably the only EFP scheme existing across the EU that is solely applying to small and smallest companies.

The best practice character and details of this concept are widely discussed among Spanish, Polish and German institutions within the Project Employee Financial Participation in Small and Medium Enterprises – A Strategy for Labour Market Policy and Regional Business Development.

This project of the Kelso-Professorship at Europa-Universität Viadrina Frankfurt (Oder) is supported by the Ministry of Labour, Social Affairs, Women and Family Affairs of the Land of Brandenburg with funds from the European Social Fund and the Land of Brandenburg. You are invited to join the final conference on the 4th of December, during which the project partners will present the results of their experience exchange.

Find more information on Sociedades Laborales in our blog post.

The best practice character and details of this concept are widely discussed among Spanish, Polish and German institutions within the Project Employee Financial Participation in Small and Medium Enterprises – A Strategy for Labour Market Policy and Regional Business Development.

This project of the Kelso-Professorship at Europa-Universität Viadrina Frankfurt (Oder) is supported by the Ministry of Labour, Social Affairs, Women and Family Affairs of the Land of Brandenburg with funds from the European Social Fund and the Land of Brandenburg. You are invited to join the final conference on the 4th of December, during which the project partners will present the results of their experience exchange.

Legal form – Prerequisites to qualify as a SL

A Sociedad Laboral (SL) is a specific form of corporation in Spain, with no exact parallel in other developed countries. It is an inexpensive form of incorporation, majority-owned by its permanent employees:

• An SL may take the form of Sociedades Anónimas Laborales or SALs (Public SL) or Sociedad Limitada Laboral or SLL (Limited Liability SL);
• Permanent workers must own more than 50 per cent of company shares;
• The minimum number of working partners is two, but no partner may own more than 33 per cent of the company’s stock (public organisations may own up to 49 per cent);
• Unlike co-operatives, it is based on share ownership and is permitted to utilise non-employee capital;

Providing stable employment for their worker-owners, who control the company’s directive bodies, they may be founded as SLs, or conventional companies may convert to this form.

Incidence of Sociedades Laborales

By the beginning of 2012, there were a total of 13,465 worker-owned companies providing 74,438 jobs and representing 3.8 per cent of Spain’s private sector companies with more than two workers.

• Clearly, the preferred legal form is the SLL (Limited Liability SL), employing an average of 4.6 workers. During the past 12 years (1999-2011), the number of workers in SLLs increased by 161 per cent.
• The general trend followed by SLs mimics that of mercantile companies since they are basically economic equals. They face the same problems as other SMEs, mainly to become sufficiently competitive.

Economic Policy: Comparison with conventional firms

Despite the lack of sound fiscal incentives, SLs have flourished over the past 15 years.

• Compared to conventional firms, SLs have grown in greater numbers, yet the net increase is negative. However, in most cases, they have converted to conventional firms (either by choice or by disqualification) becoming „victims of their success“.
• SLs have demonstrated their ability to generate stable employment and endure over time. The survival rates are slightly higher than those of conventional companies: More than 50 per cent of SLs survive the first five years.
• SL must set up a Special Reserve Fund into which 10 per cent of their annual net profits are allocated. If tax benefits are being applied for, they must allocate 25 per cent of their annual net profits to this Fund.

Labour Market Policy: Reactivating the unemployed

The key reason for the success of SLL is that since 1985, unemployed persons can capitalise their unemployment benefits as a lump sum instead of monthly payments in order to start a new SL or to recapitalise an existing SL by joining.

• If one decides to create a new co-operative or worker-owned company by capitalising unemployment compensation, a viable business plan must be presented.
• The plan is then screened by a SL development program and scrutinised by the unemployment compensation system.
• The new business continues to be monitored for three years after its founding.

Organisations such as ASLE and CONFESAL have played a key role in the support and promotion of worker-owned companies in Spain.