Being part of something bigger than you.
What EO means for staff
It means being in a community of people working together for a common goal. Having a sense of belonging.
Sure, some privately/traditionally owned companies may feel they’ve achieved this too. However there will always be some level of divide between the owners and the workers. Not in 100% employee-owned companies.
Employee ownership is where all employees have a “significant and meaningful” stake in a business. This must include both:
– financially (eg by owning shares/legal right to profits), and
– say in how its run (known as employee engagement).
This can be by direct share ownership. Achieving that for lots of employees is a big administrative effort to maintain. Hence why many firms will opt for an Employee Ownership Trust (EOT) to own the shares.
Why do employees love it?
As above, staff collectively can:
– focus on improving the business,
– enjoy the financial rewards when they succeed.
Most people want to enjoy their work. They want to feel they’re making a difference. They want to feel their efforts are rewarded.
Some will achieve this by setting up their own business. However, that’s not for everyone. It can be a lonely place, and rarely gives a reliable income.
Guide to Employee Owned company structure
Best of both worlds?
With employee ownership people do have power to change where they work, for the better.
Unlike being self-employed, they’ll also have a stable salary. Plus they’ll be part of a team working together for a common goal.
Does employee ownership give the best of both worlds? We like to think so.
Financial stake
Where the company’s shares are owned by an EOT, no staff member needs to put money into the company to buy shares. Unlike with things like management buyouts, staff aren’t re-mortgaging their homes and taking out big loans to “buy in” to their employer.
Whilst no staff have to pay to buy shares, they’ll still enjoy the profits of the company whilst they work there. It should be mentioned that with an EOT as staff don’t personally own anything, they don’t take anything with them if they leave employment, and they can’t sell anything. However, for as long as they’re employed by the company, they’re legally entitled to an equitable share of profits.
Also up to £3,600 of profit share per employee per tax year is completely tax free!
Employee Engagement
Employees need to have a say in how the business is run. There are varying ways this can be achieved, and of course staff need to be realistic. They must understand that they won’t always get what they individually want.
An EOT controlled company will have directors, much like a privately owned company. The directors will be legally responsible for the decisions the business makes.
However, unlike privately owned companies, EOTs have trustees. The employees get to elect the trustees. And the trustees do have the power to remove directors, in extreme situations.
A key thing is the employees have a lot of power collectively. Individually they have no more power than in privately owned companies.
This may be disappointing if you’re the only staff member pushing for a certain change. Without winning others round, you likely won’t get your way. However, it should help protect the firm from mavericks with crazy ideas!
My employer’s privately owned, how can I make it go EO?
Firstly, not all privately owned companies are bad. Far from it.
Plus employee ownership isn’t a magic bullet. People can become disillusioned if they’d like to exert a certain change but find they’re in a minority.
However, if you love the idea, and you’re “just” an employee of a bigger privately owned company, there’s not a great deal you can do.
The current owners need to agree to transfer ownership. Employees can’t force their employer to become employee owned.
“That’s depressing! What should I do?”
Broach subject with your employer
There’s always the possibility the current owners will love the idea, and/or have been thinking about it for a while.
Read up on the various perks for them before you approach them, so you can “sell it” well!
Go work for a company already EO
If you otherwise like your job, this would be a drastic step.
However, if you’re considering leaving anyway, look at the ownership structure of companies you’re applying to.
Set up your own business, grow it, then make it EO
Ok so this is the hardest option, requiring you to have a lot of skills, dedication, and luck!
It is possible though. Every business started as one person’s little idea that they decided to make happen!
Summary
Workers love Employee Ownership Trusts.
- Staff gain the upside of business profits, whilst retaining a stable salary.
- They give staff real say in how the business is run.
- Feel part of something bigger than you, your work is building something.
- Not much employees can do to change a privately owned company