What is EO?
The definition for employee ownership is taken from the Nutall Review 2012 - and ‘offers a meaningful stake and a say for all employees’:
- A meaningful stake - more than 25% of the businesses has to be in the hands of employees. Most commonly employee owned businesses have a majority stake of more than 51% or are 100% employee owned.
- A meaningful say - there needs to be representation of employee voice in the operational and strategic direction of the business.
There are three different types of employee ownership:
Direct - using one or more tax advantaged share plans, employees become registered individual shareholders of a majority of the shares in their company.
Indirect - held in trust on behalf of employees – currently the fastest growing option for succession is via an EOT.
Hybrid - combination of both – often seen when a family business likes to retain some family shares alongside employee ownership.
The top 5 reasons why businesses choose employee ownership:
- Succession – offers the exit the owner/founder wants while sustaining the business for future generations.
- It fits with the values and purpose of the business.
- Putting it in the hands of the people who know customers the best/ reward the hard work of employees who have helped to build the business.
- To drive innovation, customer excellence, increase productivity.
- To future-proof the business and drive resilience.