Keep your valued employees by giving them a stake in the business

employees employment Jul 04, 2022

The numbers of employee-owned businesses have more than doubled in a year, according to the Employee Ownership Association (EOA).

There are now more than 1,000 Employee Owned businesses in the UK, it says, compared with 500 in 2020.

As trading conditions become increasingly difficult thanks to a combination of factors, including the war in Ukraine, post-Covid supply chain disruption and the difficulty in recruiting skilled people, employers have turned to EOTs (Employee Owned Trusts) as a way of both spreading the risks in business and in keeping and rewarding staff for loyalty during the pandemic.

There are also tax benefits from turning a business into an EOT.

But there are a number of things to consider in structuring and formalising an EOT and it is important to understand exactly what a business is getting into.

The questions, according to accountants Price Bailey include:

  • What is the commercial purpose of an EOT?
  • Is it suitable for my business?
  • Who will be the controlling party?
  • Who will manage the EOT?
  • What is the market value of the company and what are the value of shares to be sold?
  • How will the share purchase be funded? And if the company is going to fund it, over how many years?

Businesses that have successfully converted to EOTs reportedly say that it improves social responsibility and keeps staff informed and engaged. It can also improve productivity.

If you are struggling with managing your business might an EOT be the way forward?

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