The introduction of a new company format to Austrian corporate law (FlexKapG or FlexCo) creates new possibilities for Austria’s entrepreneurs and founders. While employee participation programs will become easier to implement and thus more attractive, they still need to be carefully planned and embedded in a broader strategy. This article describes the cornerstones of the new regulation and the resulting opportunities.
New law widens scope of action for startups in Austria
With the new regulation, part of the so-called Startup Package, a long-standing demand by the Austrian startup community has finally been met and answered. From now on startups can – relatively easily – have their employees participate in the long-term development of the company’s overall value. This potentially can have a direct impact on employee retention and the overall attractiveness of an employer.
All this becomes possible via the introduction of a new company format, the FlexCapG or FlexCo, which foresees the possibility for lower capital contribution, loosened formal requirements and tax treatments for employees. The minimum capital is being decreased for both, the limited company (GmbH) as well as for the FlexKapG.
Austrian Startups to see eased conditions, within clearly defined boundaries
The new regulation offers Austrian startups increased maneuvering space when it comes to entrepreneurial decisions and action. At the same time, clear rules apply as to who can make use of these newly created freedom.
Such prerequisites are:
- Size of the company (less than 100 employees, revenue less than EUR 40 mn)
- Tenure limits
- Minimum holding periods
That means that the conceptual efforts to design an employee participation program as well as the administrative efforts to continuously operate it, remain significant and are not to be underestimated.
Embedding financial participation into an overall strategy
Employee retention requires and deserves a long-term perspective and attractive incentives. The new regulations appears to create an adequate framework to do just that: enabling startups in Austria to have their employees participate and share in the development of their company’s value.
But if financial participation is being thought of and treated as an isolated measure, i.e. without being tied to a holistic concept of loyalty and employee retention, it will only realize a fraction of its potential impact.
This is why founders and investors need to consider other additional aspects of participatory organization design such as: key employees’ involvement in strategy development, joint prioritization of projects and activities or the inclusion or consultation of employees in HR-related decision-making.
Sustainable, long-term success and the mastering of complex organizational challenges, esp. in the highly dynamic environments startups are usually operating in, require the contribution and creative efforts of everybody in the organization. With that in mind having employees participate in the potential increase of the organization’s value is therefore a logical consequence and next step. While this step has now been made easier with the introduction of the new regulation, it still needs to be carefully considered and planned as well as consistently implemented.