Employee ownership businesses
Employee ownership is where all employees have a 鈥榮ignificant and meaningful鈥� stake in a business.
This means employees must have both:
- a financial stake in the business (eg by owning shares)
- a say in how it鈥檚 run, known as 鈥榚mployee engagement鈥�
Financial stake
It鈥檚 easier for companies limited by shares to set up employee ownership.
Employees hold shares in the business through share schemes like Share Incentive Plans (SIPs). They may pay less tax if it鈥檚 an approved scheme.
Other types of business (eg charities or sole traders) may have to change their legal structure so they can sell shares. Employee-owned firms may operate as
Employee engagement
Employees must have a say in how the business is run.
Different ways of engaging employees are suitable for different businesses, but can include:
- an employees鈥� council, or other consultation group
- a constitution defining the company鈥檚 values and its relationship with employees
- employee directors on the board, with the same responsibilities as other directors
- working with trade unions on issues like pay and conditions
Guidance and model documentation
Read the guidance and model documentation for more information about types of ownership and engagement.
There鈥檚 a separate guide for employees who want to request a move to employee ownership.
You can also read guidance on the tax issues around Employee Share Trusts and when employees sell their shares.