Employee participation instead of high salaries is a tried and tested means for young companies to retain and motivate their employees. Often startups are unable to keep up with the offers of large corporations. The insurtech company Getsafe once started with a purely online brokerage business, but now sells its own insurance policies. Business should go well despite the corona crisis, said Christian Wiens, CEO and co-founder of Getsafe, on LinkedIn last year: “March was the most successful month in Getsafe’s history with more than 10,000 policies sold,” he wrote. And even today, he says in the t3n conversation, the company is doing extremely well.
In order to allow the team to participate in this success, he has now announced investments for everyone in the workforce exclusively to t3n. “Anyone who works for a startup also takes a certain entrepreneurial risk,” he says. “Therefore, he or she should also reap the fruits of their work.” According to a survey by the digital association Bitkom, in every tenth startup (10 percent) only the executives have company investments. In around every fifth (22 percent) it is the executives and selected individual employees. The participation of all employees is the big exception (8 percent). We spoke to Vienna about this step. Who, as he believes, should finally go to school in Germany.
Insurtech Getsafe introduces employee participation
t3n: Why did Getsafe decide to set up an employee participation system for everyone?
Christian Wiens: We don’t want insurance just make it different, but unconditionally better. And this mission starts from within. Our participation program has been an important part of our culture since the company was founded. With the newly introduced participation for all employees without exception, we are now taking the next logical step.
What specific advantage does that have?
Employee participation programs as Attracting people to pay lower salaries – this is a common misconception. Many startups offer salaries and social benefits, some of which are well above the industry average. Employee participation is about something else: Those who work for a startup also run a certain entrepreneurial risk. That’s the exciting thing. Therefore, he or she should also reap the fruits of the labor. Being part of the Getsafe family has always meant thinking and acting entrepreneurially. Now we have followed the corporate values with deeds and democratically and equally made all employees co-owners of Getsafe, regardless of their function.
How limited are your funds, employees simply bonus payments spend for strong performance?
Bonus payments for strong performances are independent of this, they are still there. But of course employee participation also has a performance component. Top performers can receive additional shares.
An employee participation system is especially useful if you want to grow quickly and are aiming for a stock market launch or exit. The signal: you will earn money when we get rich. Is that sustainable?
I would like to turn the question around: You made a conscious decision to start a startup because you want to make a contribution, because you believe in the idea and want to help shape something big . We have super talented people who any corporation would entice away immediately. Not to involve you in what we achieve together as a team every day, is that fair? No, not to do it would be unfair!
Are the shares treated the same as yours?
In the event of a sale or an IPO, the company shares of the employees will be treated in the same way as our shares Founders, yes. I am proud of this program. In the best case scenario, our employees can use their profits in the event of an IPO or exit to set up or invest themselves. This is exactly what Germany needs, because our startup ecosystem lives from this.
There isn’t one dominant model, but share matching or discount plans are often used. Which system do you drive?
Share matching and discount plans are common concepts among listed companies. Other mechanisms are more common among startups that are not yet traded on the stock exchange. At Getsafe we rely on so-called virtual shares or phantom shares. The employees receive virtual shares that develop in parallel with the value of the company. You benefit from a sale or IPO of the company, but without being a partner. The big advantage: In contrast to classic stock options, virtual shares neither have to be taxed in advance nor certified by a notary and are therefore less complex to manage.
How high are the virtual shares per employee?
We do not provide any information on the amount of employee shares.
In the USA, employee participation schemes are common, but not in Germany. Why is that?
On the one hand, the mentality. Entrepreneurship, taking risks, pursuing great visions, failure – none of this is part of the positive self-image in Germany, but it is in the USA. On the other hand, because of the difficult framework conditions in this country. The US is many years ahead of us here. In Germany, the process is bureaucratic and tax-unattractive. That is why founders have been calling on the federal government to reform employee participation for months.
Where is the problem?
The main problem lies in taxation. Employees usually have to pay tax on their company shares immediately, although no actual profits are made at this point in time. In addition, actual proceeds are taxed as income and not as investment income. It is time that the employees are not put in a worse position than the investors and founders.
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The equity culture is less pronounced in Germany. How much do your employees want a participation system anyway? Were there any surveys?
That’s right, many people in Germany still have to be introduced to stocks and start-up investments. We see our contribution in this. For us it is a matter of course and part of our corporate culture. There were no surveys. We want to make advance payments. Introducing such a program reactively would be the wrong approach.
Despite the advantages you have described: The risk of an entrepreneurial investment with shares cannot be discussed away for employees. Do you advertise internally for the system?
Why risk? When starting their contract, all employees receive a share package that develops parallel to the company’s value – in addition to their normal salary and all other benefits. If Getsafe goes public one day or is sold, you benefit from it. For the employees this is more of a big upside, but not a risk.
What if you fail and the shares are no longer worth anything?
Nothing ventured nothing gained. The possibility of failure is part of the startup world. As one of the best financed insurtechs in Europe with over 175,000 customers, we have already proven that we have a viable business model.
Thank you for the talk.