Despite having lavish tax incentives in place over the years to try and steer employees and business owners to establish employee-ownership businesses together, one event which has undoubtedly ignited new enthusiasm for shared equity is Covid-19.

What is an Employee-Owned Business?

An employee-owned business is a form of ownership which sees employees collectively own the shares of a business, which in turn gives them a greater stake in how the business is run and also a share of its profits. In the last 18 months alone, the UK has seen 250 new employee-owned businesses established, demonstrating record high numbers during the pandemic!

Covid-19 has had a huge impact on the UK’s economy. Whilst employee-owned businesses have faced many of the same challenges around cash flow and job retention (coupled with the uncertainty that the pandemic has presented as a whole) as other businesses, employee-owned businesses naturally have a different type of relationship with their employees, which places a unique anchor role in local communities.

Advantages of Employee-Owned Businesses

The tax savings alone make it worth considering. As part of the tax incentives offered to employee-owned organisations, businesses can pay a tax-free bonus of £3,600 to each employee every year.

Employee-owned businesses serve their purpose by not only incentivising employees to play a key role in the development and survival of the business, but by encouraging them to bring fast-thinking innovative ideas to the table to benefit everyone involved. For example, during the pandemic some employee-owned businesses devised flexible working schemes so that those with children could still do their job when schools and nurseries closed. The employees worked extra hours and shared roles as required, and the attitude that derived from these actions has been one of coming together for a common goal – to simply keep the business alive.

It is obvious that during the initial response to the pandemic, employee-owned businesses were able to demonstrate their ability to leverage their employee-ownership spirit to unite behind this common goal, enhancing their ability to adapt and innovate during the crisis.

The effects of Covid-19 has highlighted just how important it is to safeguard the long-term future of businesses, whilst keeping them rooted in their local community and retaining jobs, skills and investment. While all businesses share this common view, the added incentive for employees in employee-ownership established businesses undoubtedly aids in creating a stronger, more resilient and productive economy which is fair for everyone.

To discuss the prospect of employee ownership with one of our experts at Farleys, please contact our corporate law team on 0845 287 0939 or contact us by email if you prefer.