Employee owned businesses (EOBs) are wholly or significantly owned by their employees, either directly or indirectly. It means employees aren’t just wage earners but genuine owners and stakeholders. Metaphorically speaking, they are the home co-owners who want to invest in home improvement to increase the capital value of their asset and not just sitting tenants loathe to contribute above and beyond for the benefit of a landlord.
The Employee Ownership Association (EOA) cites these methods (direct, indirect and hybrid) of ownership as the ‘fastest growing form of business in the UK’, with numbers increasing at an annual rate of 10%. Employee ownership currently delivers 4% of UK GDP annually.
Furthermore the government’s recent inquiry into employee ownership and the publication on 27 June 2018 of the Ownership Dividend report has highlighted some of the following:
Employee ownership benefits, beyond tax reliefs, include:
- Enhanced productivity;
- Cultivation of long-term thinking; and
- Sustainable business legacy and culture with employees having a voice in corporate governance
We have a wide range of experience advising on employee ownership and employee share schemes in general. We can assist with ownership succession planning, the effective and efficient sharing of profits, equity participation by employees, equity salary sacrifice schemes.
But, we do more too. Employee Ownership should not be a place of last resort for succession planning but a model for sustainable, scalable, successful business where employees are the custodians, drivers and beneficiaries of a financially sound and strong business.
Too often when considering the merits of a transition to employee ownership the fundamental pillars and questions around good business can get overlooked; is cashflow strong, are emerging managers equipped with the commercial skills to step into the shoes of retiring vendor shareholders and how can the business best support the buyout and ensure continuing success thereafter?
Some of the latent perils mentioned in the Ownership Dividend report which can be addressed are:
- 57% of family run firms would have to cease trading within a year in the event of their owners suffering a serious illness or dying; and
- 75% of UK businesses are wasting at least 2 hrs per person every week as a result of inefficient management practices.
In this regard, when talking you through the potential for employee ownership we’d also like to offer you a free Optimize your business session and follow up report. That way you can properly plan for the best shareholder value creation not just for those looking to sell their existing controlling stake but also for those future custodians who will represent the new ownership of the business going forward.
Find out more
To celebrate National Employee Ownership Day, and to book your employee ownership consultation with our experts please contact Liz Hunter, Head of Share Schemes. To book or find out more about our free Optimize session and report for your business please contact Gareth Jones, Head of Entrepreneurial Business.
To find out more about the advantages of employee ownership, see our blog and download our factsheet.