Employee ownership is a suitable option for business, not-for-profit organisations or social enterprises – we can talk you through the benefits for all sides. There are two main routes; direct ownership or long-term ownership through a trust - or you could choose a hybrid of both. The route that is best suited to you will depend on your organisation and its employees.
Direct employee ownership
If you would like to allow your employees to personally invest in the business and benefit from any capital growth, direct employee ownership may be right for you. There are additional benefits including tax breaks for individual share ownership.
Employee Ownership Trusts (EOT)
Employees can hold shares indirectly through an Employee Ownership Trust (EOT). EOTs are a government-backed scheme with some excellent advantages including income tax-free bonuses for employees and the owners’ proceeds from a sale to an EOT are tax-free.
The Trust must buy a minimum of 51% of the company from the existing shareholders and the employees will share the rewards of the performance of the business through the payment of tax efficient bonuses. The payments to outgoing shareholders can be funded by a third party or by cash from the business as it grows over time.
Employee Ownership Association
Buzzacott are members of the Employee Ownership Association (EOA), which represents organisations that are employee owned or transitioning to employee ownership across the UK.
Is employee ownership right for you?
Employee ownership is first and foremost a cultural decision before a financial one; passing the ownership of the company to your employees in order to reward and motivate them. It can help to create goal congruency and propel the business forward. However, this requires a level of trust and transparency that does not suit every business.