The Employee Ownership Association (EOA), which is the trade body for the employee ownership sector in the UK, commissioned Ownership at Work and DJS research to conduct research into what good employee ownership looks like in the UK. This research has now been published on their website.
The research has identified nine practices which are foundational to good employee ownership. These are:
- Transparent communication and sharing information.
- Culture and behaviours.
- Employee voice.
- Sharing reward.
- Leadership and governance.
- Health and wellbeing.
- Recruitment and retention.
- Performance review.
- Empowering ethical commitments through Employee Ownership.
The importance of sharing profits with your employees
The research found that many business owners agreed that sharing profits with employees was extremely beneficial when it came to making employees feel like owners.
Various ways of sharing reward are highlighted in the research including:
- Paying tax-free bonuses where the company is owned through an EOT structure.
- Direct share ownership schemes where employees directly hold shares in the company.
- Profit-sharing arrangements which commonly refers to a distribution of a percentage of profits based on overall company performance to employees, the employee payment either being calculated by reference to salary or being in an equal amount per employee.
- Offering enhanced employee benefits which employees value and paying cost of living payments.
Clearly communicating reward schemes so that participants understand the benefits is also highlighted as a key component in sharing profits with employees.
How can employee ownership transform a business?
Findings in the previous report conducted by the EOA concluded that:
- EOBs are >50% more likely to be expanding their workforce than non-EOBs.
- >70% less likely to have a high turnover of employees.
- >25% more likely to see their profits increase
- >50% more likely to have increased investment in research and development.
- >33% more likely to be planning to increase investment in their business next year.
Samantha Lenox, Head of Employee Incentives, commented:
This research adds to the body of research and evidence regarding the benefits of shared ownership programmes and the importance of making these benefits financially tangible. When implementing a succession strategy into an employee ownership trust, it is critical to consider upfront how profits will be distributed to ensure that all stakeholders can benefit. It’s also important to consider upfront whether there is a role for direct ownership share schemes alongside an employee ownership trust succession and we can help structure this.
Explore the research report for additional insights into the potential of the UK's employee-owned business model and its effects.
If you’d like to find out more information about employee ownership, read our Employee Ownership Trusts FAQ article for guidance on what to consider, advantages, disadvantages, and necessary regulations. If you believe an EOT is suitable for you, contact our expert EOT solicitors. You can reach us on 0800 689 1800 or complete the brief inquiry form below and a team member will get in touch with you.