Benefits of Employee Ownership

Employee Owned Businesses

EOBs are owned by their employees, either directly or indirectly. It means employees aren’t just there to work but also take interest as a genuine owner and stakeholder. 

EOBs can take one of three forms:

Indirect employee ownership – employees don’t own shares in the company directly, these are usually held collectively in an employee trust.

Direct employee ownership – using one of many tax advantaged or bespoke share plans, employees can become individual shareholders and acquire direct ownership of shares in their employer company or group. 

Hybrid model – a combination of both the above with direct ownership by key management and an employee trust for all other employees.

What are the benefits?

Employees having a share of the business creates a positive and engaged workforce and produces a sense of ownership.

More benefits of employee ownership include:

• Increased productivity
• Cultivation of long-term thinking
• Sustainable business legacy and culture with employees having a voice in corporate governance
• Better financial performance
• Lower absenteeism
• Higher resistance to market fluctuations
• Recruitment and retention
• Tax savings
• Succession planning

What you need to consider when thinking about employee ownership

Employee ownership is all about communication – your employees have to understand what you are offering them and be bought into the long term plan to give them the motivation to be involved.  

The initial design of employee ownership is key – for example planning what happens if an employee leaves or wants to sell their shares, understanding how you will involve new employees (or not), being clear on how and when you cede control. Also, if you are planning to retire, you need to make sure that you have a commercially capable and motivated management team to guarantee successful

How we can help

We have a wide range of experience advising on employee ownership and employee share incentive plans in general. We can assist with ownership succession planning, the effective and efficient sharing of profits, equity participation by employees and equity salary sacrifice schemes. 

If you would like to know more about Employee Ownership or other types of sale available to you, or about employee share incentives, please get in touch today. 

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