Employee Owned Businesses-the way forward?
A report recently released by the John Lewis Partnership and Cass Business School has highlighted the growing benefit to be found in employee owned businesses (EOBs). The report suggests that EOBs with less than 75 staff are bringing in far greater profits before tax than that of their non-EOB counterparts.
This report confirms a fact which has been utilised by those with their finger on the pulse for some time, namely that employee retention is crucial to the success of SMEs. Certainly the profitability of EOBs is at least partly due to the autonomy afforded to employees in both decision making and indeed the desire to drive the business forward.
The report further illustrates that EOBs are better placed to resist recession with the employment numbers rising by 12.9% compared with 2.7% for non EOBs. They also have in general a far better stability over business cycles than those without employee ownership.
The first step many businesses take in becoming EOBs is through the use of the government backed Share Incentive Plan which allows employees to acquire shares through gift or purchase. Such plans have long been found to increase morale and in turn productivity in the workforce.
It would appear then that, certainly for the time being, offering employees a stake in the business is not just a morale booster but a very real way of improving pre-tax profits.
If you would like to discuss methods of transferring ownership to your employees through equity based rewards, please call one of our advisers on 020 8949 5522.