- Corporate Law
- 17th Nov 2021
Employee ownership is not a new concept and Employee Ownership Trusts (“EOTs”) were first introduced through the Finance Act 2014, to encourage more businesses to become employee owned. In recent years there has been a surge in the number of business converting to employee ownership using the benefits of the EOT mechanisms.
By Rachel OwenMLP Law
Employee ownership is not a new concept and Employee Ownership Trusts (“EOTs”) were first introduced through the Finance Act 2014, to encourage more businesses to become employee owned. In recent years there has been a surge in the number of business converting to employee ownership using the benefits of the EOT mechanisms. According to the June 2021 report from the employee ownership association (based on the White Rose Centre for Employee Ownership survey) over the past year there has been a 30% increase in the amount of employed owned businesses with there now being 730 employee owned businesses across the UK, which is 360 more business then reported in 2019.
So why might there be a high increase in the amount of employee owned business? One of the main factors that has caused such a steep increase in the number of businesses moving to employee ownership is the pandemic. Whilst almost all businesses were in some way affected by the pandemic, causing a decrease in sales rates, working hours and the rate of employment, to give a few examples. It opened the door for businesses to look at their possible future and how it could be improved. For many businesses they found the best way to improve during the pandemic was to convert to an employee ownership business with the main goal being to improve productivity and performance.
“The pandemic pressure put employee ownership back on the map”- The Times headline.
Rutgers School of Management and Labour relations conducted a study into employee ownership and how this business model benefited businesses during the pandemic. The study was published in October 2020 and reports that employee owned companies maintained standard working hours and salaries at significantly higher rates than non-employee owned companies. Not only that but employee owned companies were 3 to 4 times more likely to retain staff at all levels.
We will continue to see Employee owned businesses grow as it becomes increasingly popular, even the construction industry are starting to familiarize themselves with the idea of employee owned business. However, it is important to consider there are both advantages and disadvantages to Employee Ownership as stated in our guide to Employee Owned Trust.
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About the expert
Stephen is the Owner of MLP Law and leads our Commercial, IP and Dispute Resolution teams which provide advice on all aspects of the law relating to mergers, acquisitions, financing, re-structuring, complex commercial contracts, standard trading terms, share options, shareholder and partnership agreements, commercial dispute resolution, joint venture and partnering arrangements, IT and Technology law, Intellectual Property, EU and competition law, Brexit and GDPR.
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