Is employee financial participation a good idea?
Employee financial participation (EFP) is not a new idea. It has been around for decades and has been on the European agenda since 1991. The concept of financial participation is easy: make employees benefit from the profits made by the company they work for, either in the form of cash or in the form of shares.
A win-win situation…
Participation is a good idea on many levels. The money or share incentive increases the motivation of workers and their feeling of inclusion to the company, which creates an overall better work atmosphere from which employees and employers can greatly benefit. It has been proven to improve the productivity of employees and to thereby better the financial results of the company. It is also a key for employers to retain their best employees while keeping some flexibility in their expenses.
EFP thereby offers positive outcomes in businesses, employment and the economy’s performance.
…rejected by social partners
Although seemingly ideal, employee financial participation has been mostly rejected by social partners and in particular by unions on several grounds. The first concern is that EFP is too often determined only by employers without consulting with employees and unions and turns out to be a management policy affecting the life of employees without them having a possibility to act over it.
Another concern is that EFP could lead to a transfer of financial risk from the company to the employees. If a part of the wage is replaced by participation, risk is that employees would not only lose their job in case of financial difficulties of the company but also their savings. That would also possibly lead to a decrease of salaries.
Shall we throw the baby out with the bathwater?
Despite its potential flaws, we should not give up on EFP. In a time of great uncertainty for workers, EFP brings companies to seek long-term relationships with their workers and to see workers not as mere disposable adjustment units to the production, but as partners. Because of their “insider view” on the company and of their long-term commitment, employees’ role as shareholder could improve the management and help avoid damageable short-term managerial activities. The Spanish example also shows that EFP can also be used as a buy-out opportunity which would avoid selling the company to competitors or closing companies if the current management bails. This would increase work security and avoid harmful takeover in some sectors.
Employee financial participation is once again on the EU agenda through the implementation of the Pilot Project –“Promotion of Employee Ownership and Participation“ aiming at formulating possible regulations in the 28 EU Member States. This is a unique opportunity for social partners to ensure that the EFP is used to increase well-being and security among employees and isn’t used as an alternative to decent wages.
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