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Employee ownership

Thinking about employee ownership? It is hardly surprising that more and more businesses are turning to employee ownership as the business model that's right for them.

Employee ownership gives employees both a voice in how a business is run - through employee engagement - as well as a stake in the success of the business. We all know that a more engaged workforce is often a more productive workforce.

Employee ownership is a versatile model - it can work in a wide range of businesses, of all sizes, in sectors as diverse as manufacturing, retail, transport and professional services.

Moving to Employee Ownership: A brief guide for employees

Employee ownership: guide for employees Acas and BIS have written this good practice guide for employees of businesses who are considering a move to employee ownership. It provides an introduction to what is meant by employee ownership, what benefits it offers and explains the journey through which employees can request such a move.

Download GOV.UK - Employee ownership: guide for employees.

It is not necessarily applicable to public sector staff considering a move to provide the services they deliver through a public service mutual. Public sector staff should seek guidance from the Mutuals Information Service.

Employee Ownership Day

The Department for Business, Innovation and Skills hosted an Employee Ownership Day London Conference on 4 July 2013 to raise awareness of employee ownership as an economically strong and balanced business model.

The Employee Ownership Day London Conference brought together the business and legal community, alongside representatives from Government and the employee ownership sector, to provide an exciting opportunity to make progress on addressing the challenges the sector faces. Information on what progress has already been made can be found at GOV.UK - Business celebrates first UK employee ownership day.

Employee ownership questions and answers

Will I have to invest my own money in the new business and, if so, how much?

Employee ownership may involve you making a financial contribution to the business where you work, but this is not always the case. Employee ownership is about employees having a significant and meaningful stake in a business but it does not have to be financial.

It is important that all of the employees of the business (subject to reasonable qualifying conditions) receive an offer to participate on the same or similar terms. The offer should be accessible to all employees regardless of their ability to make a financial contribution.

What happens to my investment?

Any investment you make is generally used so that you can hold shares in the business either:

  • Directly, perhaps through a tax advantaged share plan or
  • Indirectly, where shares are held collectively on behalf of employees, normally through an employee benefit trust - this is known as indirect share ownership or the Trust Model.

Some businesses combine the benefits of both direct and indirect ownership.

The whole idea of employee ownership is to give employees a role in running the organisation where they work. They will often have a direct say in the financial management of the company - perhaps through an Employee's Council.

Do I lose my money if I leave or retire?

No. Having direct employee ownership through a share plan means that you can sell your shares when you want to realise the proceeds for an important life event, or to transfer the shares into an ISA or a pension to continue the tax advantages.

Having indirect employee ownership through an Employee Benefit Trust (EBT) - the Trust Model - can make it easier to arrange the buying-back of shares when an employee leaves. Recent changes to Company Law have also simplified this process under direct share ownership (visit GOV.UK - Employee ownership businesses for more information).

I'm worried about putting forward a proposal for employee ownership. What if my employer takes the suggestion the wrong way?

Ideally, an employee request should not come as a complete surprise to an employer. If there are existing communication groups where you work - perhaps set up to discuss company policies or problem-solve - these may well have flagged up employee interest at an early stage.

It will help if you and your colleagues have done some homework before putting forward a proposal. That way it will help it to have more credibility (there are some suggested sources of information and advice from GOV.UK - Employee ownership: guide for employees).

Your employer does not have to accept your proposal, but they should give it serious consideration. Hopefully, your employer will agree to set up a joint working group to look at the proposal more carefully.

Whether it is taken up or not, employee ownership can provide employers and employees with some very useful insights about the way they work together. Employee ownership might not be right for your workplace now, but giving it some thought may give the business an appetite for greater employee involvement going forward.

As a trade union representative, what role can I play in employee ownership?

As a union representative you may have an important role to play in as employee owned business. Unions can be particularly influential when it comes to:

  • putting forward an employee proposal for employee ownership. Unions representatives often have a great deal of experience in sounding out the views of wide groups of employees.
  • working as part of a joint working group to look at the proposal more carefully and discuss this with management. Union representatives can bring their skills in collaborative working and fact-finding to the table.
  • helping to maintain effective channels for employee communication and consultation. Employee voice is a vital part of engagement and union representatives have experience of putting across the views of their members.

What's the success rate for businesses that go over to employee ownership?

Research suggests that that employee ownership, when linked to employee engagement, can offer many benefits to employees, businesses and the wider economy. For example, it can:

  • provide the vehicle for greater employee commitment, engagement and well-being
  • reduce absenteeism, staff turnover and accidents in the workplace
  • produce substantially faster employment and sales growth, compared to businesses that do not have employee ownership
  • lead to higher productivity and profitability, compared to businesses that do not have employee ownership
  • give businesses a greater chance of surviving in times of economic difficulty.

If employee ownership is so great, why aren't more companies adopting it?

Companies which are employee owned, or who have large and significant employee ownership stakes, now account for over £30 billion in total annual turnover. During 2012, there was a 10% increase in the number of employee owned companies created in the UK.

Businesses that operate employee ownership exist in virtually every sector of the UK economy, across every size and stage of business and across all parts of the UK. For more information visit the Employee Ownership Association.