Employee Ownership

An Employee Ownership Trust (EOT) is a successful business model, a vehicle used to enable employees to acquire a majority holding in the business. It is held on trust and employees are involved through a committee in the strategy, direction and decision-making of the company. One of the biggest examples of this type of business is the John Lewis Partnership.

The benefits include greater business continuity and security, better employee engagement as the employees have a vested interest in the success of the company and usually a friendly sale with generally easier negotiation and smoother transitioning. Also, it allows an owner to make a partial rather than a full exit. An annual income tax-free bonus per employee is available and Capital Gains Tax relief for owners.

This approach can improve company culture as staff are empowered and benefit from the success of the company through the meaningful reward and recognition of employees. Company employees become more of a team with a common goal, a one for all and all for one approach. High employment standards will attract and retain talented staff. Employee-owned businesses are generally more successful, competitive, profitable and sustainable.

The drawbacks are that owners may have to wait many years to be paid, as opposed to receiving their money at completion of sale. If the EOT is not structured properly, the valuation may be overstated, which could be a disadvantage to employees.