An Employee Ownership Trust is one of the most popular models of employee ownership – this is because of the unique benefits that an EOT brings to the existing shareholders, the company employees, and the company itself. From increased motivation, profits, and an improved working culture, in this article will look at and explore all the benefits to the employee and business
and for a seller that comes with Employee Ownership Trusts.
EOT benefits for the seller
Due to new legislation in the 2014 Finance Act, an EOT allows shareholders to sell a majority share of a trading business, at a zero percentage rate of capital gain tax, which allows the employees to gain full market value of the shares purchased, and no money to be lost in the transition. As a result, an employee ownership trust is then able to look after the majority shares, and act within the best interest of the employees. Not only can this be a great financial decision for an array of stakeholders, but many entrepreneurs are also realising the benefits of employee ownership and beginning to imbedding this into their business model from set up.
EOT benefits for the employee
One of the main benefits to an employee is that they can receive a tax-free annual bonus of up to £3,600. Furthermore, it also allows employees to have a meaningful say in how the business is run and operated, as many decisions now will directly affect them and their potential bonuses. This can increase motivation across the workforce, and create a positive and upbeat culture as employees have a direct interest in how well the business is performing, and also encourage collaboration across the business.
EOT benefits for the business
An EOT can benefit a business greatly, as staff become more engaged and motivated at work – striving to go that extra mile. Within the UK, 730 businesses have already moved to an Employee owned structure, and have begun to see a significant increase in resilience, profitability and sustainability. Employees feel as though they are being directly rewarded for their hard work, and therefore make a collective effort to produce the best results that they can. Due to this, there has been an increase in the long term retention of employees – which has inevitably helped the businesses to grow and flourish, creating a more sustainable business model going forwards.
