The successful employee ownership model will be easier to understand and quicker to set up following the publication of new guidance by Business Secretary Vince Cable today.
Speaking at the Employee Ownership Conference in London, Dr Cable marked the first national Employee Ownership Day. He announced the publication of joint government and industry-led guidance which will help businesses move to the employee ownership model.
The documents that will reduce the complexity of moving to employee ownership include:
BIS guidance for employees who want to request a move to employee ownership that had been endorsed by Acas
- Model documentation on a move to employee ownership by Pett, Franklin and Company with accompanying BIS and HMRC guidance.
- Guidance from the Employee Ownership Association explaining the different models of employee ownership
- Guidance from Co-operatives UK on how co-operative principles and ways of working can be implemented into employee owned businesses.
The government is committed to supporting this business model and will today launch a consultation on providing two new tax reliefs to encourage employee ownership. This sector has the potential to benefit the wider economy therefore the government is seeking views from people both inside and outside the employee ownership sector to ensure the reliefs are supportive and effective.
The Employee Ownership Association in conjunction with the government, have helped to organise a number of events in the UK where employee owned businesses are opening their doors to showcase the benefits of their business model.
Deputy Prime Minister Nick Clegg said:
The benefits of employee ownership are clear. Staff who have a stake are more motivated and are rewarded for thinking in the long-term. That’s good for business and good for families, as it means lower absenteeism and lower levels of staff turnover.
That’s why from next April, the government has set aside £50 million each year to give businesses and employees an incentive to adopt employee owned models. We’ll be providing Capital Gains Tax relief for those who sell a controlling stake in a company to their staff.
Giving hard-working people a real stake in their company is a hugely underused tool in unlocking growth. This straightforward new guidance will help firms of all sizes realise their potential, boosting staff motivation and laying the foundations for growth.
Business Secretary Vince Cable said:
As we rebuild the economy, there has never been a more important time to support different ways of running a business. The evidence is that clear that employee owned businesses not only help us build a stronger economy, but boost the retention, innovation and motivation of their employees.
The Nuttall Review set us a challenging agenda a year ago. Today we are helping to meet those challenges. I hope more businesses give their employees a greater stake in their future and the success of their company.
Employee Ownership Association Chief Executive Iain Hasdell said:
Employee owned businesses contribute around £30 billion to the UK economy each year and I am delighted that the importance of employee ownership has been recognised. By publishing today’s “How To Get Started” guide for businesses interested in becoming employee owned we are shining a light on how easy it is to implement employee ownership in the UK.
Co-operatives UK Secretary General Ed Mayo said:
We are delighted to be supporting Employee Ownership Day and will be encouraging our members to take part throughout the country. Co-operative employee ownership is where the majority of the business is owned by the staff. We will also be launching Simply Buyout, an essential guide to employee buyouts and becoming a co-operative employee owned business.
Employee Ownership Day is part of the government’s commitment to help boost the size of the sector, by ensuring employee ownership is more widely understood and easier to establish.
The London Conference, held during Co-operatives Fortnight, will also showcase the pioneering approach to public service delivery that the Cabinet Office is leading on through public service mutual and outline progress made since the publication of Graeme Nuttall’s report into Employee Ownership in July 2012.
As part of the Day, the Business Secretary and Business Minister Jo Swinson will be visiting employee owned engineering company Arup, where they will tour the firm’s facilities and see some of the ground-breaking work the firm undertakes around the world.
Research also published by Co-operatives UK’s in their Economy Report showcases the benefit co-operatives provide for employees and the economy. Key findings include:
- Co-operative businesses in the UK together turnover more than £37 billion a year – an increase of 3.3% in 2012
- The sector has grown more than 20% since the start of the recession in 2008.
- 65% of conventional businesses survive their first three years compared to 90% of co-operatives which are still in business.
- Gender diversity – 37% of directorships held by women in co-operatives compared with 13% of leading UK companies.
Notes to editors:
- The documents published today and links to the EOA and Co-operatives UK can be found at: https://www.gov.uk/government/policies/making-companies-more-accountable-to-shareholders-and-the-public/supporting-pages/making-employee-ownership-more-accessible
- Information on the HMT consultation will be available at: https://www.gov.uk/government/announcements?departments%5B%5D=hm-treasury
- Co-operatives UK report Co-operatives Economy 2013 can be found out: http://www.uk.coop/economy2013
- Employee ownership means a significant and meaningful stake in a business for all its employees. If this is achieved then a business has employee ownership – it has employee owners. What is meaningful is not confined to financial participation. Irrespective of any financial participation, employees must have access to organisational structures that ensure employee engagement. Where financial participation takes place there is no set rule on what percentage of issued share capital is a significant and meaningful stake.
- Employee ownership can generally take one of three forms:
- direct employee ownership - employees become individual owners of shares in their company;
- indirect employee ownership - shares are held collectively on behalf of employees, normally through an employee benefit trust; and
- combined direct and indirect ownership - a combination of individual and collective share ownership.
- The Employee Ownership Association estimates that UK based employee owned companies had a turnover of over £30 billion and employed over 130,000 people in 2011. Evidence shows that employee owned businesses enjoy greater staff retention, innovation and motivation than non-employee owned businesses, which in turn deliver wider economic benefits including increased productivity, profitability and more resilience to economic shocks.
- Sharing Success: The Nuttall Review of Employee Ownership can be found at: https://www.gov.uk/government/publications/nuttall-review-of-employee-ownership
- The independent Nuttall Review of July 2012 set out the economic and social benefits of employee ownership, including improved business performance, increased economic resilience, and greater employee engagement and commitment. The Review also made a series of recommendations to government on how to increase the uptake of employee ownership in the private sector and what barriers needed to be removed to enable this. The Government responded to the Review on 30 October supporting or accepting in whole or in part all of the recommendations.
- Key facts on Employee Ownership:
- Between 2008 and 2009, employment in businesses with employee ownership grew 12.9% compared to 2.7% in businesses without employee ownership. At this rate, over the five years since then, the average business with employee ownership would employ over 60% more people than a business without employee ownership, if both started with the same number of employees.
- Between 2008 and 2009, sales in businesses with employee ownership grew 11.1% compared to 0.6% in businesses without employee ownership. At this rate, over the five years since then, sales in the average employee owned business would be 64% higher than the business without employee ownership, if both started with the same volume of sales.
- Businesses with employee ownership have delivered strong shareholder returns. Since 1992, the Employee Ownership Index (EOI) has outperformed the FTSE All Share by an average of 10% annually. An investment of £100 in the EOI when the index began in January 1992 would at the end of September 2012 have been worth £661 whilst the same investment in the FTSE All-Share Index would only be worth £244.
- The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.