Celebrating the benefits of Employee Ownership

Employee Ownership Day, 21 June 2024, is a great time to reflect on the impact that employee ownership can have on the culture and success of a business.

Employee ownership empowers employees by giving them a stake in the future of a business, thus helping to create a culture of collaboration, innovation, and commitment. This can lead to higher productivity, increased employee satisfaction, and a stronger sense of community within the workplace.

At MHA, we are proud to assist and advise businesses in their succession plans and guide those who want to transition into an Employee-Owned Business (EOB). Going into an EOB can be a transformative process, ensuring the longevity and resilience of a business as well as employee well-being. Those that embrace this model often experience better business performance and a more engaged workforce.

Current trends

We are finding that there is a growing interest in employee ownership among our clients at MHA. Many of our clients have built up their business over a long time and see EOB as a great way to preserve what they have built. An EOB can help retain the ethos and culture of the business as well provide the current owners with a way to exit on their own terms, ensuring the business remains in the hands of people they know and trust.

Benefits of Employee Ownership

It is worth keeping in mind that the benefits of an EOB go beyond financial gains. For employees, it offers a sense of security and a greater connection to the success of the business. EOBs typically give employees a stronger “voice” in business decisions than other ownership structures, which can result in greater employee retention and a more motivated workforce. Of course, that helps drive long-term success and sustainability.

Employee Benefit Trusts (EBTs), including Employee Ownership Trusts (EOTs), as well as equity incentive plans, can all play a role in becoming an EOB. Each offer their own specific advantages (and disadvantages) which need to be considered. Whilst the tax benefits associated these can be significant, particularly an EOT where the tax advantages are well publicised (an effective 0% tax rate on sale) the primary advantage of a well-run EOB is the creation of a more inclusive and committed workforce.

Each method for EOB can provide a way to ensure the legacy of existing owners, and the culture of the business, is preserved - and help employees to partake in the growth that they contribute to through their efforts.

Who might be interested in Employee Ownership?

Employee ownership is an attractive option for many businesses, particularly those that value a collaborative and inclusive culture.

Knowledge-based businesses, such as architects, those in advertising, design, publishing, fashion, or music, quantity surveyors, management consultancies, and healthcare companies, may find this model especially beneficial.

However, the advantages of employee ownership are not limited to any particular industry. We have seen successful transitions in printing, manufacturing, and retail businesses as well.