What is employee ownership succession?

In this article we briefly cover the basics of employee ownership and what it could mean for the future of your business.

Employee ownership is exactly what it sounds like, though it can take a number of different forms.  It can be a way in which ownership of the company is put all, or partially, into the hands of the employees (either directly or indirectly) in order to enact retirement or succession planning.  It can also be a way to set up a company with an engaged workforce from day one.  Employees gain a say in the running of the business, though this is still left to management, and the increased levels of transparency about a company’s affairs can lead to greater employee satisfaction.

Employee ownership is one of the fastest growing forms of business ownership in the UK and research suggests that employee-owned businesses have a tendency to be more resilient, competitive, profitable and sustainable.  It can be a way of securing the long-term future of a business.

Employee-owned businesses tend to have more engaged and committed employees, as they are consulted more and have a greater vested interest in the success of the business and feel more like part of a wider team.

When considering employee ownership from a retirement or succession planning angle, it is key to realise that this is a way to preserve the culture and nature of the business and the team, which a sale to a competitor or third-party investor may not.

There are three main forms of employee ownership:

1. 100% trust ownership;

2. direct ownership of shares by individual employees; or

3. a hybrid model which includes a trust and some individual share ownership.

Further details of the different options can be found in our article 'What structures are available for employee ownership?'